MMT: Sectoral Balances - Why The Government Must Run Deficits

Professor L. Randall Wray explains the idea of sectoral balance. Imagine if the economy were just you and me. If I were to spend less than my income (a surplus), then therefore you’d be receiving from me less than you’re giving to me (a deficit). What I net receive from you (my surplus) minus what you net give to me (your deficit) must sum to zero. This same argument holds true if you scale it up to the whole economy: the sum of all the surplusses and deficits must be zero. For convenience, MMT divides t