Does deficit spending increase national debt? | Steven Watson

3 min read
A national economy, with a sovereign currency, is big money system. Unlike a household the independent inputs and outputs are not income and expenditure. The input to a national economy is currency that is introduced into the system through public spending. The output is the money that leaves to go abroad, as a trade deficit, currency that is saved by the private sector (households and business) and money that is removed from the system through taxation.

The diagram below illustrates this system for the UK in 2016. The government spent £745 billion2All data is approximate and…

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