Government Deficit Spending Creates Private Sector Surpluses

To be clear, this applies to currency issuing governments ONLY. This is true of the US Federal government. This is not true of the government of Texas. The US is the currency ISSUER. Texas is a currency USER, just like you and me.

Having said that, the reason we have money is because the currency issuing government spent more of it into existenance than they taxed out of existence.

Government spending creates money. Taxation destroys money.

Government spending PRECEDES taxation.

If government spending did not precede taxation, there would be no money with which to pay the taxes.

Government spending PRECEDES the sale of Treasury Bonds.

If government spending did not precede the sale of Treasury Bonds, there would be no money with which to buy the bonds.

Below is a chart of US Government Balances vs Domestic Private Sector Balances and the US Capital Account (money non-Americans are investing in American in excess of what Americans are investing abroad). It runs from 1952 Q1 to 2014 Q4.

Image of the financial balances of the US Government Sector, the private sector, and US Capital Accounts, 1952 to 2015.
Sector Financial Balances as a Percent of GDP, 1952 to 2015  

In the video below, Stephanie Kelton explains this concept really well during which she explain how to read the cart above. The video runs for 9 minutes and 46 seconds.

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