Nominal gilt yields, I said, were determined much more by inflation than by government borrowing. I remember writing a research note for Nomura back in the early 90s arguing that increased government borrowing would not increase gilt yields because the same increased private saving that was the counterpart of government borrowing would easily finance that borrowing. Dr Kelton explain these ideas wonderfully clearly, so I recommend this book to all non-economists interested in government finances.įor this economist, though, it poses a problem. Where there are resources lying idle, governments should raise spending to employ them. Instead, the question, as Dr Kelton says, is: can the extra spending be resourced? The constraint on raising health spending for example - if there is one - is a lack of doctors and nurses, not a lack of finance. Asking how we will pay for public spending is therefore daft. Let’s start by saying that I wholly agree with the main claims she makes - that a government which enjoys monetary sovereignty can always finance its borrowing. Lars Pålsson Syll writes Why Krugman and Stiglitz are no real alternatives to mainstream economics Lars Pålsson Syll writes Behind the model Lars Pålsson Syll writes Spekulationsbubblor Lars Pålsson Syll considers the following as important: Economics This could be interesting, too: Where there are resources lying idle, Topics:

It is therefore paradoxical that Stephanie Kelton’s The Deficit Myth, which claims to challenge orthodox economics, should be guilty of just these vices. One common objection to neoclassical economics is that it underweights the importance of history and class.

The deficit myth summary