,BRITA9 IS ,HEAD+ = ANO!R #bh ,CRA%3 ,H]E'S :Y 

,PEOPLE 3 

,AU?OR 3 ,DAVID ,GRAEB] 

,TEXT 3 

,BRITI% PUBLIC LIFE HAS ALWAYS BE5 RIDDL$ ) TABOOS1 & NO:]E IS ?IS MORE TRUE ?AN 9 ! REALM ( ECONOMICS4 ,Y\ CAN SAY ANY?+ Y\ LIKE AB\T SEX N[ADAYS1 BUT ! MOM5T ! TOPIC TURNS TO FISCAL POLICY1 !RE >E 5DLESS ?+S ?AT EV]YONE KN[S1 ?AT >E EV5 WRITT5 UP 9 TEXTBOOKS & S*OL>LY >TICLES1 BUT NO ONE IS SUPPOS$ TO TALK AB\T 9 PUBLIC4 ,IT'S A REAL PROBLEM4 ,BECAUSE ( !SE TABOOS1 IT'S IMPOSSIBLE TO TALK AB\T ! REAL REASONS = ! #bh CRA%1 & ?IS MAKES IT ALMO/ C]TA9 SOME?+ LIKE IT WILL HAPP5 AGA94 

,I'D LIKE TO TALK TODAY AB\T ! GREATE/ TABOO ( ALL4 ,LET'S CALL IT ! ,PET]-,PAUL PR9CIPLE3 ! LESS ! GOV]NM5T IS 9 DEBT1 ! MORE EV]YBODY ELSE IS4 ,I CALL IT ?IS BECAUSE IT'S BAS$ ON V]Y SIMPLE MA!MATICS4 ,SAY !RE >E #d POK] *IPS4 ,PET] HOLDS HALF1 ,PAUL ! O!R4 ,OBVI\SLY IF ,PET] GETS #a MORE1 ,PAUL HAS #a LESS4 ,N[ LOOK AT ?IS3 IT'S A DIAGRAM ( ! BALANCE BETWE5 ! PUBLIC & PRIVATE SECTORS 9 \R ECONOMY3 

  

,NOTICE H[ ! PATT]N IS SYMMETRICAL8 ,! TOP IS AN EXACT MIRROR ( ! BOTTOM4 ,?IS IS :AT'S CALL$ AN 0ACC\NT+ ID5TITY04 ,ONE GOES UP1 ! O!R MU/1 NECESS>ILY1 GO D[N4 ,:AT ?IS MEANS IS ?AT IF ! GOV]NM5T DECL>ES 0WE MU/ ACT RESPONSIBLY & PAY BACK ! NATIONAL DEBT0 & RUNS A BUDGET SURPLUS1 !N IT 7! PUBLIC SECTOR7 IS TAK+ MORE MONEY 9 TAXES \T ( ! PRIVATE SECTOR ?AN IT'S PAY+ BACK 94 ,?AT MONEY HAS TO COME FROM SOME:]E4 ,SO IF ! GOV]NM5T RUNS A SURPLUS1 ! PRIVATE SECTOR GOES 9TO DEFICIT4 ,IF ! GOV]NM5T R$UCES ITS DEBT1 EV]YONE ELSE HAS TO GO 9TO DEBT 9 EXACTLY ?AT PROPORTION 9 ORD] TO BALANCE !IR [N BUDGETS4 

,! *IPS >E R$I/RIBUT$4 ,?IS IS NOT A !ORY4 ,JU/ SIMPLE MA?4 

,N[1 OBVI\SLY1 ! 0PRIVATE SECTOR0 9CLUDES EV]Y?+ FROM H\SEHOLDS & CORN] %OPS TO GIANT CORPORATIONS4 ,IF OV]ALL PRIVATE DEBT GOES UP1 ?AT DOESN'T HIT EV]YONE EQUALLY4 ,BUT :O GETS HIT HAS V]Y LITTLE TO DO ) FISCAL RESPONSIBILITY4 ,IT'S MO/LY AB\T P[]4 ,! WEAL?Y HAVE A MILLION WAYS TO WRIGGLE \T ( !IR DEBTS1 & AS A RESULT1 :5 GOV]NM5T DEBT IS TRANSF]R$ TO ! PRIVATE SECTOR1 ?AT DEBT ALWAYS GETS PASS$ D[N ON TO ?OSE LEA/ ABLE TO PAY IT3 9TO MIDDLE-CLASS MORTGAGES1 PAYDAY LOANS1 & SO ON4 

,! PEOPLE RUNN+ ! GOV]NM5T KN[ ?IS4 ,BUT !Y'VE LE>N$ IF Y\ JU/ KEEP REPEAT+1 0,WE'RE JU/ TRY+ TO BEHAVE RESPONSIBLY6 ,FAMILIES HAVE TO BALANCE !IR BOOKS4 ,WELL1 SO DO WE10 PEOPLE WILL JU/ ASSUME ?AT ! GOV]NM5T RUNN+ A SURPLUS WILL SOMEH[ MAKE IT EASI] = ALL ( US TO DO SO TOO4 ,BUT 9 FACT ! REALITY IS PRECISELY ! OPPOSITE3 IF ! GOV]NM5T MANAGES TO BALANCE ITS BOOKS1 ?AT MEANS Y\ CAN'T BALANCE Y\RS4 

,Y\ MAY BE OBJECT+ AT ?IS PO9T3 BUT :Y DOES ANYBODY HAVE TO BE 9 DEBT8 ,:Y CAN'T EV]YBODY JU/ BALANCE !IR BUDGETS8 ,GOV]NM5TS1 H\SEHOLDS1 CORPORATIONS 444 ,EV]YONE LIVES )9 !IR MEANS & NOBODY 5DS UP [+ ANY?+4 ,:Y CAN'T WE JU/ DO ?AT8 

,WELL !RE'S AN ANSW] TO ?AT TOO3 !N !RE W\LDN'T BE ANY MONEY4 ,?IS IS ANO!R ?+ EV]YBODY KN[S BUT NO ONE REALLY WANTS TO TALK AB\T4 ,MONEY IS DEBT4 ,BANKNOTES >E JU/ SO MANY CIRCULAT+ ,I,\S4 7,IF Y\ DON'T BELIEVE ME1 LOOK AT ANY BANKNOTE 9 Y\R POCKET4 ,IT SAYS3 0,I PROMISE TO PAY ! BE>] ON DEM& ! SUM ( FIVE P\NDS40 ,SEE8 ,IT'S AN ,I,\47 ,P\NDS >E EI!R CIRCULAT+ GOV]NM5T DEBT1 OR !Y'RE CREAT$ BY BANKS BY MAK+ LOANS4 ,?AT'S :]E MONEY COMES FROM4 ,OBVI\SLY IF NOBODY TOOK \T ANY LOANS AT ALL1 !RE W\LDN'T BE ANY MONEY4 ,! ECONOMY W\LD COLLAPSE4 

,SO !RE HAS TO BE DEBT4 ,& DEBT HAS TO BE [$ TO SOMEONE4 ,LET US REF] TO ?IS GR\P COLLECTIVELY AS 0RI* PEOPLE01 S9CE MO/ ( !M >E4 ,IF ! GOV]NM5T RUNS UP A LOT ( DEBT1 ?AT MEANS RI* PEOPLE HOLD A LOT ( GOV]NM5T BONDS1 :I* PAY QUITE L[ RATES ( 9T]E/2 ! GOV]NM5T TAXES Y\ TO PAY !M (F4 ,IF ! GOV]NM5T PAYS (F ITS DEBT1 :AT IT'S BASICALLY DO+ IS TRANSF]R+ ?AT DEBT DIRECTLY TO Y\1 AS MORTGAGE DEBT1 CR$IT C>D DEBT1 PAYDAY LOANS1 & SO ON4 ,( C\RSE ! MONEY IS /ILL [$ TO ! SAME RI* PEOPLE4 ,BUT N[ ?OSE RI* PEOPLE CAN COLLECT MU* HI<] RATES ( 9T]E/4 

,BUT IF Y\ PU% ALL ! DEBT ON TO ?OSE LEA/ ABLE TO PAY1 SOME?+ DOES EV5TUALLY HAVE TO GIVE4 ,!RE W]E ?REE TIMES 9 REC5T DECADES :5 ! GOV]NM5T RAN A SURPLUS3 

  

,NOTE H[ EA* SURPLUS IS FOLL[$1 )9 A C]TA9 NUMB] ( YE>S1 BY AN EQUAL & OPPOSITE RECESSION4 

,!RE'S EV]Y REASON TO BELIEVE ?AT'S EXACTLY :AT'S AB\T TO HAPP5 N[4 ,AT ! MOM5T1 ,CONS]VATIVE POLICY IS TO CREATE A H\S+ BUBBLE4 ,9FLAT$ H\S+ PRICES CREATE A BOOM 9 CON/RUCTION & ?AT MAKES IT LOOK AS IF ! ECONOMY IS GR[+4 ,BUT IT CAN ONLY BE PAID = BY SADDL+ HOME[N]S ) MORE & MORE MORTGAGE DEBT4 ,H]E'S ! ,(FICE = ,BUDGET ,RESPONSIBILITY'S [N FIGURES ON :AT'S GO+ TO HAPP5 TO ! CO/ ( H\S+ 9 ! NEXT FEW YE>S3 

  

,! EXPRESSION 0TAKES (F LIKE A ROCKET %IP0 COMES MO/ IMM$IATELY TO M9D4 ,& H]E'S :AT IT SAYS WILL HAPP5 TO H\SEHOLD DEBT AS A RESULT3 

  

,?IS TAKES US RI<T BACK TO EXACTLY :]E WE W]E RI<T BE=E ! #bh MORTGAGE CRISIS4 ,DO Y\ REALLY ?9K ! RESULTS WILL BE ANY DIFF]5T8 

,BUT SOME?+ ALONG !SE L9ES HAS TO HAPP5 :5 ! GOV]NM5T RUNS A SURPLUS4 ,EV]YONE WILL JU/ KEEP PU%+ ! DEBT ON TO ?OSE LEA/ ABLE TO PAY IT1 UNTIL ! :OLE ?+ COLLAPSES LIKE A H\SE ( C>DS3 JU/ LIKE IT DID 9 #b#h4 

7,S\RCE3 ,RETRIEV$ ON #b#h? ,NOVEMB] #bba FROM WWW4!GU>DIAN4COM47 

,FROM 3 ,!,AN>*I/,LIBR>Y4ORG4 

,*RONOLOGY 3 
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