Re: Re: Much ado about nothing?

--- Peter Kriesler <P.Kriesler@unsw.edu.au> wrote:
>
>
> I can save in the form of any asset I wish.

You can accumulate non financial assets as desired.
Net financial assets, however, denominated in
the govt's unit of account, come only from deficit
spending by that govt.

 If we
> accept that the level of
> government borrowing does not influence net saving,

I the sense that net savings of financial assets
equals cumulative net govt spending.

> then the more the
> government borrows, the more people save in the form
> of government debt,
> rather than some other asset.

I'd say it this way- the more the govt deficit spends
the more net financial assets held by the non govt
sector.

 With given net saving,
> this must have the
> effect of lowering demand for other assets,

Govt tax liabilities induce sellers of real goods
and services, so yes, this process can be viewed
as taxation lowering the desire to hold real assets,
which is perhaps another way of saying offering them
for sale in exchange for the unit of account.

So for a given level of savings of net financial
assets (=govt deficit spending) the demand for
other/real assets has ALREADY been reduced in favor of
the desired savings.

 and
> hence lowering aggregate
> demand.

Taxes lower agg demand, as above. This is evidenced
by sellers of real goods and services in exchange
for that which they need to pay the taxes plus any
residual desire to net save that unit of account.

Just exactly what influences this desire to net
save the unit of account is an open question. Govt.
secs support a term structure of rates that may have
some influence, positive or negative.

Best,

Warren

===http://www.mosler.org
      http://www.moslerauto.com

Primary email contact: wmosler@mosler.org

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Received on Tue Feb 4 14:50:55 2003