These two charts come from Citigroup, and though you’ve probably seen various versions of them before, in our opinion you can’t see them enough, as they really cut through the biggest issues of the day.
The first one, on the left, shows that private sector savings tend to mirror public sector deficits. Public sector deficits fuel private sector savings and vice versa. And no time in history has everyone saved (delevered) at the same time. And if you think that private sector deleveraging is important and good (or at least necessary) then public sector borrowing is inevitable, and welcome.
The second chart on the right gets right to the heart of the public deficit. It’s not about expenditure growth, which has been steady. It’s about the revenue collapse. And we’re not going to close that deficit without growth and more revenue.
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