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Wednesday, October 19, 2005

Deficits don't matter?

I have been trying to understand the theory in these papers (from this Skeptical Optomist Post.) The basic idea is that with a fiat currency, government spending effectively creates 'money' and government taxation both provides the money's value and destroys it. Since the government can create money the focus on deficits from a traditional viewpoint (that of you or I in our personal finances) is inappropriate. It is certainly an interesting way of looking at things, and I am sure it is correct to at least a certain extent. I am going to have to mull over this for a while. If you want an interesting way to look at government fiscal/monetary policy the articles are certainly worth reading.


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