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Bernie Sanders: Self-shackled Champion of the People

letsgetitdone's picture

I gotta love Bernie Sanders, because he seems so much like people I grew up with and like myself too, and he also seems to have that passion for equality and democracy that is so important for the future of America. Sometimes I think Bernie is one of the few champions of the people left in Congress. But I also think that along with other progressives he has constructed chains for himself that prevent him from being as effective a champion of the people as he otherwise might be.

His chains are the chains of either false beliefs or a decision not to speak the truth about fiscal matters for fear that the “very serious people” in the Washington village will marginalize him even more than they do right now. I can't say which of these is true, but I think whichever reason is operative, his self-shackling reduces his effectiveness.

Bernie's shackles were illustrated recently in an article he did for Truthdig called “For a Budget That Is Both Morally and Economically Sound.” This post is an extended paragraph by paragraph commentary on his article, which I hope will make the nature of the chains he's forged for himself very clear. Here's Bernie:

As a member of the U.S. Senate Budget Committee, I am more than aware that a $17 trillion dollar national debt and a $700 billion deficit are serious problems that must be addressed.

Why does Bernie Sanders continually reinforce the message of the austerian debt hawks by recognizing that the debt subject to the limit and the amount of the deficit are serious problems? He should be saying that they are political and messaging problems, but not economic problems. He should be beginning to educate progressives about the fact that sovereign fiat currency issuers can't have involuntary solvency problems no matter what the level of their public debt or public debt-to-GDP ratio is, and that the size of the deficit ought to be determined by the savings and import desires of the private sector, and be ought not to impacted by arbitrary deficit targets set by Government policy.

By constantly making obeisance to the first premise of the austerians, he sets up progressives to target deficit reduction as a requirement of fiscal policy, with other goals, such as full employment, as subject first to deficit reduction needs. This blunts the force of progressive advocacy, because even as they protest their primary devotion to jobs, greater economic equality, ending poverty, education, managing climate change, repairing and modernizing infrastructure, and other important policy goals, they act to approach these goals within the deficit/debt reduction framework that is the home ground of the austerians.

But I am also aware that real unemployment is close to 14 percent, that tens of millions of Americans are working for horrendously low wages, that more Americans are now living in poverty than ever before and that wealth and income inequality in the United States is now greater than in any other major country—with the gap between the very rich and everyone else growing wider and wider.

Yes, but before he does anything about these things, he has to make sure that the fiscal policy he proposes is politically correct in that it projects deficit and debt reduction over time, and the projections he frequently bases his policies on are ones related to CBO projections, which are incoherent in that they don't take into account sectoral financial balances and their implications for future economic outcomes.

Further, when we talk about the national budget, it is vitally important that we remember how we got into this fiscal crisis in the first place and who was responsible for it. Let us never forget that when Bill Clinton left office in January of 2001, the U.S. had a budget surplus of $236 billion with projected budget surpluses as far as the eye could see. During that time, the non-partisan Congressional Budget Office projected a 10-year budget surplus of $5.6 trillion, enough to erase the entire national debt by the end of 2011.

Is Bernie serious about this? In October 2011, he announced formation of an “expert advisory panel” with 19 economists on it. At least four of those economists: Jamie Galbraith, Bill Black, Randy Wray, and Stephanie Kelton, believe that the Clinton budget surpluses were only achieved at the cost of an equivalent increase in total private sector debt, and also that the CBO budget projections were unsustainable regardless of the fiscal policy implemented following their occurrence.

They believe, in addition, that these surpluses plunged the nation into the recession of 2000 – 2002. They also believe that CBO budget projections are incoherent and invalid, and have said so at various times. If Senator Sanders has spent any time talking to the members of his panel at all, he should have heard plenty about their views on this and also the views on debts and deficits I expressed earlier.

What happened? How did we, in a few short years, go from a large budget surplus into horrendous debt? The answer is not that complicated. Under President Bush we went to wars in Afghanistan and Iraq—and didn’t pay for them. We just put them on the credit card. The cost of those wars is estimated to be between $4 trillion to $6 trillion. Further, Bush and Congress passed an expensive prescription drug program that was unpaid for. They also reduced revenue by giving huge tax breaks to the wealthy and large corporations. On top of all that, the Wall Street collapse and ensuing recession significantly reduced tax receipts and increased spending for unemployment compensation and food stamps, further exacerbating the deficit situation.

Both wars were very bad policy. The prescription drug benefit was both inadequate and far too expensive because it was a giveaway to the pharmaceutical companies. Also, the tax cuts for the wealthy did very little for the economy and certainly exacerbated the situation of increasing inequality in the United States. And additionally, these Bush programs certainly did create deficit spending and end the surpluses.

But, I also think that Bernie Sanders also ought to realize that the surpluses would have disappeared anyway, in a very short time, because they were draining net financial assets from the private economy, and it was only a matter of time before the increasing private debt accompanying those surpluses would have led to a severe demand contraction and accompanying recession. Knowing this is important, because without that recognition policy makers will, in a situation like the one in the years before 2000, continue targeting surpluses until the inevitable increasing private debt bubble produces a crash.

Interestingly, the so-called congressional “deficit hawks”—Congressman Paul Ryan, Senator Jeff Sessions and other conservative Republicans—all voted for those measures that increased the deficit. These are the same folks who now want to dismantle virtually every social program designed to protect working families, the elderly, the children, the sick and the poor. In other words, it’s okay to spend trillions on a war we should never have waged and large defense budgets, and provide huge tax breaks for billionaires and multi-national corporations. It’s just not okay when, in very difficult economic times, we try to protect the most vulnerable people in our country.

Senator Sanders is right to point to deficit hawk/austerian inconsistency and hypocrisy when it comes to deficit spending. Clearly they are austerian when it comes to programs that benefit the poor and the middle class, but fight very hard for government spending or tax cuts that benefit them.

Where do we go from here? How do we now draft a federal budget which creates jobs, makes our country more productive, protects working families and lowers the deficit?

For a start, we have to understand that, from both a moral and economic perspective, we cannot impose more austerity on the people of our country who are already suffering. The time is now for the wealthy and multi-national corporations who are doing phenomenally well to help us rebuild America and lower our deficit.

First, how we get the results Bernie Sanders calls for is outlined in any number of papers, books, and blogs by MMT economists and writers including this recent blog series of mine. Can we do it in a way that lowers the deficit? I doubt it, as long as we maintain the kind of foreign sector trade balance accompanying our role in the international economic system we have now, and as long as we want our private sector to increase its net financial assets year after year.

If we intend to run trade deficits in the neighborhood of 3 – 6% of GDP, while also having private sector aggregate savings of say, 6%, then we must have Government deficits of 9 – 12% of GDP every year we want to accommodate these targets. This isn't a conjecture. It is an accounting identity.

We can lower the government deficit if we want to, but we'd have to either save less in the private sector or have smaller trade deficits, or even trade surpluses, or all three over a number of years. Government can force such a change by cutting budgets, and this will work as long as private credit sources step up and maintain demand by allowing consumers to increase private debts. But again, this is unsustainable in the longer run, and also it means that both private sector net financial assets and real benefits from trade will grow more slowly over time than people would like.

Second, for a start we have to realize that from an economic and moral perspective it is not so much about realizing that we can't impose austerity on people who are already suffering, but more that we don't need to impose it, and it is therefore immoral to do so, because we cannot involuntarily run out of money, and therefore the levels of our debt and debt-to-GDP ratio are of no economic concern, but are only a political and messaging problem. In short, we can create all the money we need to cover the whole of our safety net, and to expand it if we wish, without any help from the wealthy and the multi-nationals.

At a time when the richest 1 percent own 38 percent of the financial wealth of America, while the bottom 60 percent own a mere 2.3 percent—we cannot balance the budget on the backs of people who have virtually nothing. When 95 percent of all new income during 2009 through 2012 went to the top 1 percent, while tens of millions of working Americans saw a decline in their income, we cannot cut programs that these workers depend upon.

Well, actually, and unfortunately, we can do all of these things if we are mean enough, immoral enough, and stupid enough, all of which many of our representatives appear to be. But, again, it would be both economically stupid and also immoral to make these cuts, since we can create the money to pay for the programs on the chopping block without difficulty, and also if we do not do so we will hurt both the people benefiting directly from these programs, and also the larger economy by depriving it of much needed consumption and fiscal multiplier effects.

Instead of talking about cuts in Social Security, Medicare and Medicaid, we must end the absurdity of one out of four corporations in America not paying a nickel in federal income taxes. At a time when multi-national corporations and the wealthy are avoiding more than $100 billion a year in taxes by stashing money in tax havens like the Cayman Islands and Bermuda, we need to make them pay taxes just like middle-class Americans. The truth of the matter is that according to the most recent information available profitable corporations are only paying 13 percent of their income in federal taxes which is near a 40-year low.

While in January 2013, we successfully ended Bush’s tax breaks for the richest 1 percent, the truth is that they continue to exist for the top 2 percent, those households earning between $250,000 and $450,000 a year. That must end.

There's no question that for the sake of our government's legitimacy we desperately need progressive tax justice. Those who can afford the tax burden must be made to shoulder it. However, we also need to be clear about some fundamentals. First, some level of taxation is needed to maintain the value of one's fiat currency. People must at least need to acquire the dollar, pound, or yen of account to pay taxes and settle legal disputes in order for the currency to continue to be valuable.

But, second, there is no reason why it is necessary to match government spending dollar for dollar with tax revenues or credits from the sale of debt instruments. In order for the government to spend enough to lift the economy out of the stagnation produced by the crash of 2008 and our rather pitiable response to it, the government doesn't need to raise the money it spends through taxing and or borrowing. In fact, it can tax less than it does now, and also not borrow money at all to do that spending.

To make this happen, the Government (i.e. Congress) may want to change the rules of Government financing to mandate the Federal Reserve to create any dollars the Treasury needs to deficit spend Congressional appropriations. But, it is within Congress's constitutional authority to do that, and politicians like Bernie Sanders ought to be advocating for that change, so that the mere existence of deficits and debts is no longer a political barrier to doing what we need to have done to create full employment at a living wage, and all the other things we so desperately need.

Failing that change, however, it's possible and perfectly legal right now to cause the Federal Reserve to create the dollars needed to pay off “the national debt” when it falls due, issue no more debt instruments, and also cover all deficit spending by having the Treasury order the US Mint to issue and deposit in its Federal Reserve account High Value Platinum Coins (HVPCs), and then for Treasury to use the seigniorage fulfill all its obligations without either increasing taxes or borrowing back dollars previously created by the Government.

Why isn't Bernie Sanders and other progressives advocating for the President to use this method of government finance? Surely it's better to do this than to have repeated debt ceiling crises, or to cut entitlements using the false justification that “we're running out of money,” or continuing to wallow in economic stagnation, because we can't get Congress to raise taxes on the wealthy.

So far, only one progressive Congressperson, Jerrold Nadler (D-NY) has called for the President to use Platinum Coin Seigniorage (PCS) to fund spending or repayment of debts, and he quickly backed off when the President took that alternative off the table. So, the question is, why are all these defenders of the people so silent on this subject? Why aren't they responding to every call by the Administration and its supporters and opponents to legislate entitlement cuts with the reply “We don't need entitlement or safety net cuts, because you can use PCS to cover the cost of entitlements and other safety net programs forever any time you want to”?

C'mon Bernie, where are you and the progressive caucus in the House on this one? Where are headline progressives like Alan Grayson, Elizabeth Warren, Sherrod Brown, and Keith Ellison? The problems of funding entitlements, the safety net, and deficit spending to create jobs are separate from the problem of creating tax justice. There's no need to conflate the two.

Also, you need to realize that even if you were able to get increased taxes on the wealthy at this point, that increase in tax equity would need to be accompanied by increased federal deficit spending to avoid economic contraction. Yes, it's true that the multiplier from federal tax cuts for the wealthy and presumably for federal tax increases on them is only $.30 for each dollar involved. However, that $.30 is $.30 in lost economic activity per dollar taxed, and if we are to raise those taxes, then that loss in economic activity needs to be replaced through passing additional Government deficit spending, or tax cuts on non-wealthy people to increase the deficit.

Bernie and other progressives need to realize this, and never never advocate either tax increases in isolation, or tax increases in return for spending cuts. This last kind of deal is the worst of both worlds from the standpoint of lifting us out of the stagnation we are now experiencing because it destroys net financial assets in the private economy from two directions.

At a time when we now spend almost as much as the rest of the world combined on defense, we can afford to make judicious cuts in our military without compromising our military capabilities.

We certainly can “afford” to cut military spending. But, please, can we forget the meme about spending almost as much as the rest of the world combined?

First, that's not relevant, because we should be planning our military programs based on real and specific threats, and not based on what the rest of the world is doing. Second, we don't need to cut military spending out of economic need, because we have all the capability we need to create the money we need for it. Third, by all means cut it to the level appropriate to the real threats we face, but when we do, we also must replace that spending with equal or greater fiscal multiplier federal spending or tax cuts or credits for the middle class and the poor, else we will be hurting the economy by making these cuts. And fourth, very good replacements would be expanding Social Security benefits and expanding the food stamp program.

Frankly, it is time that Congress started listening to the ordinary people. Recently, the Republican Party learned a hard lesson when the American people stated loudly and clearly that it was wrong to shut down the government and not pay our bills because some extreme right-wing members of Congress do not like the Affordable Care Act. Well, there’s another lesson that my Republican colleagues are going to have to absorb. Poll after poll make it very clear that the American people overwhelmingly do not want to cut Social Security, Medicare and Medicaid. In fact, according to a recent National Journal poll, 81 percent of the American people do not want to cut Medicare at all; 76 percent of the American people do not want to cut Social Security at all; and 60 percent of the American people do not want to cut Medicaid at all. Meanwhile, other polls have made it very clear that at a time of growing income and wealth inequality, Americans believe that the wealthiest among us and large corporations must pay their fair share in taxes.

It is about time that Congress started paying serious attention to what people want as reflected in the polls. But the problem here is that they do, in part, but they pay attention to the wrong results in polls. Specifically, they pay attention to polls measuring their own chances for re-election, above all else. What people say they want in other polls is not as important to them as what people say they intend to do about them.

So, somehow, what people want more generally, must be connected to their evaluation of their Congressperson in a very concrete way. Until people themselves decide to vote against their Congressperson because he or she won't support Medicare for All, or because they're expressing an intention to vote for entitlement and safety net cuts, or because they won't do anything about reducing unemployment, things will not change. Bernie and other progressives need to figure out a way to create that kind of coupling so that representatives are exposed to the consequences of their legislative decisions.

It is time to develop a federal budget which is moral and which makes good economic sense. It is time to develop a budget which invests in our future by creating jobs rebuilding our crumbling infrastructure improvement and expanding educational opportunities. It is time for those who have so much to help us with deficit reduction. It is time that we listen to what the American people want, and not just respond to the billionaire class and major campaign contributors.

It is time to do all this, except for worrying about deficit reduction. In fact, it is a great mistake to worry about deficit reduction for its own sake, because: 1) we can afford whatever deficits we need to run, 2) the debts we incur are of no fiscal importance in themselves, 3) we need not even incur additional public debt even if we do run deficits, and 4) we need continuous deficit spending as long we want the private sector to rebuild its balance sheets and acquire real net wealth from abroad in return for dollar credits. So, it is “loser liberalism” to worry about deficit reduction and condition all of one's fiscal policy legislation to that criterion. Concerns about deficit/debt reduction and all that implies are the chains with which Bernie and other progressives bind themselves in the political fight for social and economic justice. Bernie, please talk to your economic advisers and free yourself from these shackles!

As for tax justice and equity, we badly need that too. But let's not hold ending economic stagnation, and attaining full employment at a living wage, and all the other problems we need to solve, hostage to creating tax justice. People are suffering out there. Let's end the suffering first, and then create tax justice.

The opportunity to do that will come soon enough, when economic reasons for raising taxes eventually align with the need for tax justice. That will happen once we get to full employment.

(Cross-posted from New Economic Perspectives)

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Comments

Submitted by Hugh on

As I said recently, Sanders folds so often and so easily that even cheap lawn chairs make fun of him. Nobody in Washington takes him seriously. He's just another Trojan horse meant to deflect progressive energies and keep them from coalescing into something that just might challenge the system. Sanders voted for Obamacare which is all you really need to know about him. The sooner we realize that there are no progressives in Washington the sooner we can start working on putting some real progressives there.

Hugh

Alexa's picture
Submitted by Alexa on

Excellent post, lets.

Agree with all of it (that is that isn't over my pay grade, LOL!), except maybe the part about Senator Sanders "not understanding" stuff.

Sadly, I believe that he does understand, but that his "function" is to mollify the Dem Party Base--anyway that he can.

Especially, after the last time that I spoke to him about some of the provisions in Bowles-Simpson's "The Moment Of Truth," which the President has included in his Budgets, and in his recommendations to the Super Committee (in 2011).

(I've spoken to him during during the "Brunch With Bernie" segment of the Thom Hartmann Radio Program, on numerous occasions.)

On the last occasion, Senator Sanders literally countered my points with "talking points," and changed the subject.

Hey, I don't pretend to be able to read his mind. And he may be a progressive at heart. Actually, I'm inclined to believe that he is.

But it appears to me that he is kept on a very tight leash by the corporatist Dem Establishment.

And that he is welcome to do whatever he can to keep "liberals" on board--at least long enough to cast their votes for corporatist Dem candidates. But that there are certain lines that he cannot cross--like acknowledging the duplicity of many of the corporatist, DLC, Third Way, No Labels Dems, when it comes to their part in beginning to dismantle the social safety net. (Again, I basically believe the he is sincere that he personally, does not want to see this. And I understand that he is in a difficult position, since he wants to keep his committee assignments, etc.)

Sherrod Brown is the one that really disappoints me, now.

I've called his office and thanked him profusely (through his staff, of course) more than once for his willingness to defend progressive principles and goals while a guest on C-Span's "Washington Journal." (when he was a US Representative)

But what a difference becoming a Senator makes.

He is far more "measured" and boilerplate in his responses, now.

Anyway, thanks for your diary.

Maybe it will inspire some of the lawmakers that you mention, to stand up for the American People.

Alexa

“If a dog won’t come to you after having looked you in the face, you should go home and examine your conscience.” -- Woodrow Wilson

[Avatar Photo Credit: Conflagrate, jurvetson's photostream, flickr]

transcriber's picture
Submitted by transcriber on

The shark jump heard round the world:

http://www.correntewire.com/russell_brand_vs_jeremy_paxman_the_full_tran...

Jeremy Paxman: But if they were to take you seriously, and not to vote –

Russell Brand: Yeah, they shouldn’t vote, they should – that’s one thing they should do, don’t bother voting. Because when it reaches – there’s a point – see these little valves, these sort of like little cozy little valves of recycling and Prius and like you know turn up somewhere, it stops us reaching the point where you think, I see, this is enough now. Stop voting. Stop pretending. Wake up. Be in reality now. Time to be in reality now. Why vote? We know it’s not going to make any difference. We know that already.

Jeremy Paxman: It does make a difference.

Russell Brand: So like I have more impact at West Ham United cheering them on, and they lost to City, unnecessarily, sadly.

Jeremy Paxman: Well now you’re being facetious.

Russell Brand: Well, facetiousness has as much value as seriousness. I think you’re making the mistake of mistaking seriousness for the –

Jeremy Paxman: You’re not going to solve world problems by facetiousness.

Russell Brand: We’re not going to solve them with the current system! At least facetiousness is funny.

Jeremy Paxman: Sometimes.

Russell Brand: Yeah, yeah, sometimes, Jeremy.

[...]

Russell Brand: You don’t have to take – well, firstly, I don’t mind if you take me seriously. I’m here just to draw attention to a few ideas. I just want to have a little bit of a laugh. I’m saying there are people with alternative ideas that are far better qualified than I am and far better qualified, more importantly, than the people that are currently doing that job, because they’re not attempting to solve these problems. They’re not. They’re attempting to placate the population. Their measures that are currently being taken around climate change are indifferent, will not solve the, will not solve the problem.

DCblogger's picture
Submitted by DCblogger on

That is the sort of thing that confirms me in the view that Brand is a self important bloviator. No wonder he has his own TV show. Don't vote. Give up. Lets just sit in front of our TVs and wank, 'cause that is going to make such a difference. If voting made no difference, there wouldn't be any voter suppression. Voter suppression is the clue that voting is vitally important. You just should not waste your vote on the legacy parties. Look around, check out the emergent party candidates and vote for the one that most pleases you. But don't listen to wankers who advise you to give up and just watch their TV show.

Submitted by hipparchia on

Voter suppression is the clue that voting is vitally important.

that's pretty much my take on voting too, but it would have taken me a lot more words to get around to saying that, so i thank you for the tweetable version.

Submitted by lambert on

Good argument!

First they ignore you, then they ridicule you, then they fight you, then you win. -- Mahatma Gandhi

transcriber's picture
Submitted by transcriber on

Russell Brand: So until people start addressing things that are actually real, why wouldn’t I be facetious? Why would I take it seriously? Why would I encourage a constituency of young people that are absolutely indifferent, to vote? Why would we? Aren’t you bored? Aren’t you more bored than anyone? Ain’t you been talking to them year after year, listening to their lies, their nonsense? Then it’s this one gets in, then it’s that one get in, but the problem continues? Why are we going to continue to contribute to this facade?

Just wondering. I saw your post offering election services that Lambert pegged to the top of the front page for days.

I've got a lifetime of voting, and I'm sick of the results to tell you the truth. I vote for truth and get lies. Fuck em. In my mind, the revolution has started... I'm thinking maybe it's possible anyway. I'm thinking, I'm thinking.

Russell Brand: The revolution of consciousness is a decision, decisions take a moment. In my mind the revolution has already begun.

Cujo359's picture
Submitted by Cujo359 on

If we intend to run trade deficits in the neighborhood of 3 – 6% of GDP, while also having private sector aggregate savings of say, 6%, then we must have Government deficits of 9 – 12% of GDP every year we want to accommodate these targets. This isn't a conjecture. It is an accounting identity.

Why this is an accounting identity isn't intuitively obvious to the casual observer. At least, its not intuitively obvious to me. Is there an explanation somewhere? I hate it when I need an explanation for something that doesn't need one...

Meanwhile, I tend toward Alexa's view of why Sen. Sanders hasn't comprehended the obvious here. At least, he should realize by now that deficits and debt don't matter very much in an economic downturn, and he should be saying so. Unfortunately, because he's not a Democrat he may feel the need to be more loyal than actual Democrats do.

At least, that's an alternative explanation that makes sense.

letsgetitdone's picture
Submitted by letsgetitdone on

Here's a passage from a recent post of mine:

What we will see however, is continuing austerity from CRs or budget agreements, whether or not the sequester is lifted. Where a trade deficit exists, Government austerity is either running a surplus, or a deficit so low that it doesn't make up for the leakage in demand due to the trade deficit. Let's say one's trade deficit is 3.5% of GDP, then the Sectoral Financial Balances (SFB) Model (whose terms refer to flows of financial assets among the three sectors of the economy in any defined period of time):

Domestic Private Balance + Domestic Government Balance + Foreign Balance = 0

tells us that the domestic private sector, taken as a whole, can't increase its net financial assets, unless the Government has a deficit greater than 3.5%. And, if we wanted to provide for the domestic private sector to save 6% while it was running that 3.5% trade deficit, anything less than a Government deficit of 9.5% of GDP would not meet that objective.

Of course, no budget proposed by anyone in Congress or the White House envisions a deficit this large. Patty Murray's Senate Budget proposed in the Spring of 2013 envisioned a 4.2% of GDP deficit for FY 2014, just a bit more than the austerity boundary of 3.5%. Paul Ryan's House Budget proposed a 3.2% deficit, which is an austerity budget, in the precise sense that given a 3.5% trade deficit, it would entail the private sector running a deficit and losing 0.3% in net financial assets.

Will either a compromise bill coming out of the budget committee, or a CR, after a failure to agree on a budget, be closer to Ryan's or Murray's deficit figure? I think it will be closer to Ryan's; partly because the Congress just passed a CR for the first approximately three months of the fiscal year that is closer to Ryan's view than to Murray's and which maintains the sequester, and partly because I doubt that the Democrats will even propose a more expansive budget involving a deficit, but will just focus on getting the sequester removed in early 2014, and will then turn to other problems and to positioning themselves for the fall elections.

There are lots of more complete explanations around in work by Randy Wray, Bill Mitchell, Stephanie Kelton, Scott Fullwiler, Warren Mosler and others. A good treatment is in Randy Wray's MMT primer, especially Posts 2 - 5.

Submitted by lambert on

Foreign Balance = 0" Because think about it... Where else could there be for the money to go?

Dumb question, so answer for the dumb, please. I see abstractly the difference between stock and flow, but intutively I see these as stocks, not flows. And isn't accounting always a snapshot in time, i.e. of stocks?

First they ignore you, then they ridicule you, then they fight you, then you win. -- Mahatma Gandhi

letsgetitdone's picture
Submitted by letsgetitdone on

The flows involved are the flows of financial assets to and from the various sectors. The domestic balance is the aggregate balance of flows of financial assets over a time period. The other two balances are the same. We can look at the aggregate balances as the flows incrementing or decrementing existing stocks in over a time period. The stocks are what exists at the beginning of a time period and at the end of a time period.