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Wednesday, September 22, 2010

How to balance the books

As Obama selects his new economic team, this chart may be a useful resource. It's simplified, of course, but it could be the E=MC-squared of economics!

As a general rule of thumb...

Taxes = Spending
Principal = Lending
Interest = Grants

The grants are needed to halt the vicious cycle of more borrowing to pay old debts. Government can lend to small businesses and use the interest to build green infrastructure.

If deflation is a problem, increase spending.
If inflation is a problem, increase taxes.


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