By Matthew Berg
1. A Parable About the Origin of Money
Perhaps the most convincing single example cited by proponents of the view that money is a commodity is the well-known use of cigarettes as “money” by Allied prisoners of war in Germany during World War II. Just six months after being liberated by the U.S. Army, former POW R.A. Radford published his famous article in the journal Economica, “The Economic Organization of a P.O.W. Camp,” describing how he and his compatriots had used cigarettes as a medium of exchange during their unpleasant stay at their not-so-idyllic Bavarian Stalag. Continue reading
By Joe Firestone
Deficit spending by the government is merely the counterpart of private sector saving. What government deficit spending does is to permit the private sector to achieve its level of desired saving. When the latter changes, government spending ought to be adjusting in the opposite direction to offset it (unless the current account balance happens to do the job).
This very simple statement by Marshall Auerback reflects the Sector Financial Balances (SFB) Model I discussed in “A Plague On All Your Budgets.” The Sector Financial Balances Model:
Domestic Private Balance + Domestic Government Balance + Foreign Balance = 0; Continue reading