I think the thing about the household finances model is that like so many metaphors, it has its limits and its opposite has limits too.
I think crucially here, limits to government spending are a lot softer than limits to household spending.
Printing money; it's possible for the UK government to print £1B or £1T or £1Q, I don't know whether it's legal but I'm pretty sure that if not it's possible to change the laws (or change the laws that control the laws, or whatever) to allow it. It is not possible for us to print $1Q worth of money; yeah, we could print the notes, but by the time the notes are printed, they're not worth as much as they were just before the order was given. It's probably impossible to work out how much the real-terms value of the money we can print is - or the real-terms income we can extract from it, but it's clearly not infinite.
Borrowing: there's no hard bound on the number of bonds the government can issue, far too many and no-one will buy them, a bit less and people will only buy them at loan-shark rates. I thought it would be instructive to look at what's happening in Argentina that had a debt crisis a decade or so back; on the one hand you don't want your country to go through such a crisis, on the other hand Argentina seems to have recovered quite nicely. Also inequality seems to be going down there, OTOH it's Latin America so it's still a lot higher than the UK (disturbingly enough, our inequality is below the median, which doesn't say good things about the rest of the world).
There's also the way a nation is more of a "whole system" than a household. A nation can borrow money, and thereby create an economic stimulus that improves its income, offsetting some of the cost of the borrowing. A family... their stimulus effect on the rest of the economy is likely to be so small that they're unlikely to see much of a benefit from it. I suspect there are other effects for governments that are very different than for households too.
There's something about how nations recover from crises that I don't understand, I'm not sure how well anyone understands it. My inner cynic says "some social class gets its expectations crushed and then suddenly there's enough to go around after all" but I don't want to commit saying that.
no subject
Date: 2018-03-01 03:50 pm (UTC)I think crucially here, limits to government spending are a lot softer than limits to household spending.
Printing money; it's possible for the UK government to print £1B or £1T or £1Q, I don't know whether it's legal but I'm pretty sure that if not it's possible to change the laws (or change the laws that control the laws, or whatever) to allow it. It is not possible for us to print $1Q worth of money; yeah, we could print the notes, but by the time the notes are printed, they're not worth as much as they were just before the order was given. It's probably impossible to work out how much the real-terms value of the money we can print is - or the real-terms income we can extract from it, but it's clearly not infinite.
Borrowing: there's no hard bound on the number of bonds the government can issue, far too many and no-one will buy them, a bit less and people will only buy them at loan-shark rates. I thought it would be instructive to look at what's happening in Argentina that had a debt crisis a decade or so back; on the one hand you don't want your country to go through such a crisis, on the other hand Argentina seems to have recovered quite nicely. Also inequality seems to be going down there, OTOH it's Latin America so it's still a lot higher than the UK (disturbingly enough, our inequality is below the median, which doesn't say good things about the rest of the world).
There's also the way a nation is more of a "whole system" than a household. A nation can borrow money, and thereby create an economic stimulus that improves its income, offsetting some of the cost of the borrowing. A family... their stimulus effect on the rest of the economy is likely to be so small that they're unlikely to see much of a benefit from it. I suspect there are other effects for governments that are very different than for households too.
There's something about how nations recover from crises that I don't understand, I'm not sure how well anyone understands it. My inner cynic says "some social class gets its expectations crushed and then suddenly there's enough to go around after all" but I don't want to commit saying that.