Be Careful What You Wish For
from SeekingAlpha.com: Home Page by John Mauldin
John Mauldin submits:
"Everyone" is upset with the level of fiscal deficits being run by nearly every developed country, and with much justification. The levels of fiscal deficits are unsustainable and threaten to bring many countries to the desperate situation that Greece now finds itself in. 'We must balance the budget' is the cry of fiscal conservatives. But there are unseen consequences in moving both too fast or too slow in the effort to get the deficits under control. Today we look at them as we explore what a fine mess we have gotten ourselves into.
GDP = C + I + G + (X-M)
We have discussed the above equation before, but let's look at it again from a different angle. Basically, the equation is another accounting identity. GDP (Gross Domestic Product) for a given country is the total of Consumption (personal and business) plus Investments plus Government spending plus exports minus imports.