Response to Opinion piece “View From Canada: Americans Just Don’t Get It, Yet” by Brian Lee Crowley, Sept. 27, 2012
If Brian Lee Crowley is correct that Americans “just don’t get it,” then the reason is that they, like him, do not understand functional finance, as first propounded by the economist Abba Lerner back in 1941.
If there is a deficiency of purchasing power in the national economy because imports exceed exports and the private sector is net saving, then the federal government must fill the gap with spending, irrespective of the current debt level or debt ratio.
Failing that, a downward spiral of increasing unemployment ensues, as is evident in the eurozone where stringent austerity measures have led to riots in the streets.
But Americans certainly do understand that if they reduce their debt sharply by cutting back on government services and also increasing taxes, they will head right over a fiscal cliff and take the world economy with them.
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