Exploring Government Spending Dynamics

Economists seem conditioned to think that we need to suffer before an economy can get back on track. They argue an economy can’t grow if there is a large amount of accrued government debt. That the economy needs confidence to grow, and the confidence won’t exist the government owes a lot of money.

Phil suggests to Steve that confidence and the private sector’s a willingness to invest are two staple requirements for economic growth. A government deficit will also help, but does it really help in terms of the growth in the money supply as much as private borrowing? And isn’t a growth in the money supply essential to growth?

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