Ed Harrison of Credit Writedowns has an excellent post explaining some very pertinent facts about the government deficit as it relates to private saving (wealth) and investment. Well worth reading if you are concerned about the deficit.
The relation he talks about has been well explored by several economists - In 'Stabilizing an Unstable Economy', Minsky adds the financial sector to the sectors that Harrison mentions - and again, shows how additional government deficit equals increases in private and financial sector wealth. The interplay at these aggregate or macro levels often turns intuition on its head...
What I find so interesting about Obama's voicing of concern and a willingness to go down the path of Hoover is that Government Deficit has to be good for business - so why would financial (business) advisers to our politicians push so hard to Balance the Budget?
