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FIG 6 :   This is a plot of yearly GDP and yearly deficits in unadjusted dollars starting from 1960 ending in 2010. The deficit is increasing slowly from 1960 to 1972 during the days of gold standard. From 1972 to 2000 GDP increases as the deficit is decreasing with a slope equal to 4000billion in 500 billion or 8.  For 1 dollar of deficit GDP changes by $8. After this deficits increase again and the GDP rises more slowly. GDP changes by 1000 billion for a deficit change of 300 billion, a slope of 3. In the region of falling deficits the slope is larger, near 8. Most recent data shows deficits increasing a lot and the GDP falling. This is the region of Wall street gambling, mortgage crisis, trillion dollar wars etc. which have done nothing good to the economy.

Data for this is from Section S – FedBeaSna  : A001  S. 1.a Total Economy-Current account combined with A007 Federal Govt for deficits.

FIG 6 Deficits vs. GDP

Another proof of MMT.  This is a plot of gross national wealth on the x axis plotted vs. the same quantity in the same year minus govt deficit minus External balance. The years start at 1960 and end at 2011.The plot combines BEA Section S A007 S.7 a Federal Govt and A003 S.3 .a. Households and Nonprofit Institutions Serving Households. (FL152090005  minus  FL312090095 minus FL262090095)  is the value along the y axis which agrees with the household net worth   FL152090005. Each (deficit plus net export) adds to peoples’ wealth. The dollars are current values not adjusted for inflation.

Another way of thinking about the plot is as a plot of actual wealth on the x axis compared to the predicted  wealth calculated using the MMT equations of balance which is also used by

http://www.bea.gov/national/nipaweb/Ni_FedBeaSna/DownSS2.asp?3Place=N

The xl files were downloaded from the above website.

(Federal Deficits = Net Private Savings+ net imports), applies to USA and other nations that have their own currencies.  Both federal deficits and net exports add to private savings.

 

pshakkottai

the economy

The diagram shows flows of money in blue and stocks at year end . GDP is the level of money in a holding tank at the end of the year. The government pours money into this tank and a counter keeps track of the outflow. Money flows through household and industrial sectors which exchange money between them and the money flows out to taxes and exports. A counter measures the tax flow which is counted. Money also flows from imports into the GDP tank. The counter readings also refer to conditions at year end.

(Counter_out) – (counter_in) is the deficit in the simple case with no external trade. With trade we add counters to imports and exports. Govt spending and imports feed GDP and taxes and exports remove GDP. In the diagram counters are not shown for imports and exports. The cumulative deficit is merely the number of…

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