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Budgtet, Economy

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CAR12345
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Post: #11
RE: Budgtet, Economy

Thank you very much... Now, i have asked this a BILLION times, how do you think my state is doing?
How is my state doing? And, thank you for the helpful advice..

10.07.2013 20:59
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CAR12345
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Post: #12
RE: Budgtet, Economy

Ok, guys my state's economy was doing great until I tried to increase my currency's value. How do you have 1% intrest rate , high money supply, huge trade surplus plus postive budget and a valuable currency? Question for AR mastersPrayi27x25 And Helseworth can't a govt run a surplus and the PS (Private Sector) run one if there is net foreign savings, equavilent of a trade surplus?The following accounting identity shows an aggregate relationship that must hold by definition for a closed economy, such as the global economy as a whole:

(G – T) = (S – I)

In this identity, G is government expenditure, T is tax revenue, S is private saving and I is gross private investment. The left-hand side, G – T, is the budget deficit. The right-hand side, S – I, is referred to as net private saving. It is the amount of disposable income that is not spent by the private sector. This can be seen by noting that S = Y – C, where Y is disposable income and C is private consumption expenditure, which implies S – I = Y – (C + I). In words, net private saving is that part of disposable income that is neither consumed by households nor invested by firms.

The identity can therefore be restated as:

Budget Deficit = Net Private Saving

This shows that, in a closed economy, the net saving of the private sector matches the budget deficit dollar for dollar. A larger budget deficit means higher net private saving. A reduction in the budget deficit implies lower net private saving.

This relationship makes sense considering that government expenditure involves crediting private bank accounts whereas taxing involves debiting private bank accounts. If the government spends more and taxes less, there is a net increase in private bank deposits held by households and firms, and a corresponding increase in bank reserves, held in special accounts with the central bank. Some households and firms may use the extra funds to buy government bonds, which will result in some bank reserves being converted into bonds. Either way, there is an increase in net financial assets (which comprise currency, bank reserves and government securities). If, on the contrary, governments try to cut spending and raise taxes, as they are beginning to do in a misguided attempt to reduce government debt, private saving will be squeezed.

For open economies (i.e. individual trading nations), the analysis can be extended to include external sources of revenue and expenditure. The accounting identity becomes:

(G – T) = (S – I) – NX

Here, NX denotes net exports (exports minus imports). In words, we have:

Budget Deficit = Net Private Saving – Net Exports

If we rearrange this expression, it becomes clear that there are now two possible sources of private domestic saving:

Budget Deficit + Net Exports = Net Private Saving

If domestic citizens sell more goods and services to foreigners than they buy in return, export revenue will exceed import spending and there will be a build up of financial assets. So, in an open economy, private net saving can come either from government deficit expenditure or net exports.

In many countries, though, including the US, net exports are typically negative, which means the external sector subtracts from net private saving. From:http://heteconomist.com/budget-deficits-and-net-private-saving/ KopfkratzHmm
Also, it is true a currency soverign nation can't DEFAULT unless it invest in foreign curriences, or no one accepts thier currencyHehe But, that's why the U.S is able to mantain such vast debt, I mean it's the only country that doesn't have to buy foreign currencies to get foreign goods, and the only one that can LEGALY print U.S dollars, but the way the govt is handling it's own currency is not good. I mean even China is getting tired of it and investing in other precious items like gold, silver, etc. I am a hardocre american citzen and don't approve on how America is handling it's own currency!Vangry http://www.thetrumpet.com/article/3237.1...oses-value

01.08.2013 18:36
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CAR12345
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Post: #13
RE: Budgtet, Economy

Economic masterminds? Helsworth? Rising Phoneix? Herman Cain? Anyone?Kopfkratz

01.08.2013 20:09
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Helsworth
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Post: #14
RE: Budgtet, Economy

Your state is doing well.
And as for your question, you can run whatever budget surplus you like in AR. It's a game, after all. But in reality, you don't see states who have positive debt. All states are net payers of interest.
Net exports is foreign savings, but those foreign savings are in FOREIGN CURRENCY. There's a reason why budget surpluses (small ones) cause recessions. The domestic economy operates in its own domestic currency. If government is taxing more of it than it spends, that's a problem for the private sector. All of the US's recessions up to the Great Depression came on the heels of budget surpluses. Including the Clinton surpluses.
China's a net exporter, and it's running a gov deficit.
Look at this graph. When the green is in the negative, it means the USA was a net exporter. Look at those times periods. The US government ran budget deficits. Once again I repeat myself, there are 3 sectors in the modern economy. All 3 cannot be in a position of surplus at the same time. Someone needs to run a deficit, so the others can be in surplus. And the only one able to do that without going bankrupt is the government.


And here's the sectoral balance sheet for the Eurozone.

Look at those states which have gov surpluses. Their private sector surpluses are either negative, or very close to 0.


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This post was last modified: 02.08.2013 10:36 by Helsworth.

01.08.2013 20:58
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CAR12345
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Post: #15
RE: Budgtet, Economy

Thanks Helseworth.bYou are one econmic smart dude....Jaja

01.08.2013 21:59
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Helsworth
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Post: #16
RE: Budgtet, Economy

You're welcome.


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01.08.2013 22:02
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CAR12345
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Post: #17
RE: Budgtet, Economy

But, how can I increase my currenys value , I highered my intrest but my currenys not going up,

01.08.2013 22:10
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Helsworth
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Post: #18
RE: Budgtet, Economy

CAR12345 Wrote:
But, how can I increase my currenys value , I highered my intrest but my currenys not going up,

Well for starters, you can decrease your nominal interest rate. There's absolutely no point in increasing it, if you want consumption and investment to go up. You can achieve strong currency with 1% nominal interest rate. Your huge budget surplus and positive debt is starting to erode your economic performance.
Annual percentage change of inflation 3.40 %
Annual percentage change of economy -1.70 %

Your MS is trailing your GDP. You need to increase it to bring it slightly above GDP. You need to begin reducing fiscal drag ASAP.


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02.08.2013 08:57
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CAR12345
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Post: #19
RE: Budgtet, Economy

Thanks, helseworthJaja I see you finally made another stateCool
After 2099 a virus created by an anonymous computer hacker called Helsworth managed to evolve while infecting the world's governments data bases. This virus managed to penetrate highly classified data bases of the super power states, America, Russia, China and The British Empire; This classified digital information was of alien design, and the limited AI of the virus gathered this alien impulses of information, and evolving in to an alien artificial brian. Thus Helsworth reduced the world to sinders, and through it's ashes created the Mainframe Empire, with humanity as it's core industry.Lachweg LOL...

02.08.2013 16:24
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