As of March 31, 2016, total household indebtedness was $12.25 trillion, a $136 billion (1.1%) increase from the fourth quarter of 2015. Overall household debt remains 3.3% below its 2008Q3 peak of $12.68 trillion. – FRB report
This chart is one of the foundations of Modern Monetary Theory. It is a historical account balance showing that as deficits are allowed to increase, so does money in the pockets of citizens ! As deficits are decreased, or surpluses created, the citizens move toward household bankruptcy !
The essential fallacy of politicians who scream about the deficit, or who cut public funding when federal tax receipts decrease during a recession:
The federal government is NOT a household ! Yes, a household must balance their budget. The federal government does not operate by the same rules. The government is what CREATES MONEY ! Households can go bankrupt. A federal, sovereign government in charge of creating money CANNOT GO BANKRUPT
The federal government CURRENTLY CREATES $85Billion EVERY MONTH. It does not hurt anyone. It does not cause inflation. The only problem is that the money created GOES TO THE BANKS AND CORPORATE HOARDS ! IT DOES NOT REACH THE CITIZENS.
If policy were implemented to create money for public spending on education, to cover the cost of forgiving debt for college, to help home-buyers, or to invest in public infrastructure, like a German-style green-energy power grid, IT WOULD NOT HURT ANYTHING OR ANYONE! CASH AND CREDIT ARE WHAT CITIZENS NEED FOR RELIEF. SPENDING INCREASES ECONOMIC FLOWS, AND EVEN GENERATES MORE TAX REVENUES FOR LOCAL GOVERNMENTS ! THE ENTIRE DEBATE ABOUT FEDERAL “DEBT” AND AUSTERITY CUTS TO STATE GOVERNMENTS, SCHOOLS, ETC. IS A SCAM ! The Federal government owes no-one it can’t pay !
For a video from economics Ph.D. Stephanie Kelton, who is currently working with Senator Sanders’ economic committee in Congress, this is a decent introduction.
For more discussion and resources, visit the Institute for New Economic Thinking.
if the efficacy of monetary policy, or of monetary policy alone, is rejected, as it is by Keynes, then the pursuit of full employment must be by fiscal means (Aspromourgos 2012). And if further, these fiscal means require deficit spending, then a chronic underemployment problem might require permanent deficits and indefinitely growing public debt.
– Yanis Varoufakis