Indebtedness and mercantilism

Jean-Paul Guichard

doi:10.2298/pan0903409g

Abstract

In a closed economy, the growth of the GDP is equal to the net indebtedness (the increase of indebtedness) of it agents from one period to another, which allows current demand to be greater than the income of the preceding quarter. In an open economy, we must add to that the net indebtedness of the totality of foreign agents in operation: the currencies corresponding to the foreign trade balance. Depending on the sign of these two kinds of net indebtedness, positive or negative, a classification of countries can be made: mainly mercantilist countries that enjoy a foreign surplus, on the one hand, and 'Keynesian' countries running a deficit, whose growth is founded upon domestic demand, on the other hand.

Highlights

The present study constitutes a complement to the very important contribution made by Antoine Brunet, “A Pertinent Analytic Key to Correctly Measure Contributions to Growth in Gross Domestic Product”, the contents of which are accepted
The «OECD» breakdown ∆GDP=∆DTDD + ∆TFB, in which TDD is total domestic demand and FTB is foreign trade balance, is justifiably criticized because it leads to non-significant results, to the extent that the two terms on the
If demand in quarter n (TDDn), is greater than income earned during the previous quarter (GDPn-1), it follows that the increase of indebtedness of the economic agents during this period is greater than their savings: the net indebtedness of these economic agents over the course of period n is positive

Summary

Introduction

The present study constitutes a complement to the very important contribution made by Antoine Brunet, “A Pertinent Analytic Key to Correctly Measure Contributions to Growth in Gross Domestic Product”, the contents of which are accepted . A country can go capture demand in another timeframe (...) by allowing its nationals to borrow more overall than they save...”. It is this mode of presentation (space and time) that poses a problem. If demand in quarter n (TDDn), is greater than income earned during the previous quarter (GDPn-1), it follows that the increase of indebtedness of the economic agents during this period is greater than their savings: the net indebtedness of these economic agents over the course of period n is positive. We can write the equation as follows: In-1 + net indebtedness TDDn. Net indebtedness determines demand. Certain economic agents are in debt vis-à-vis other agents; from the viewpoint of the economy as a whole, there is net indebtedness of the entire set of economic agents vis-à-vis themselves, i.e., it is a «domestic» net indebtedness because, by hypothesis, we are in a closed economy

Opening up the economy

Mercantilist countries

Countries in a transitory phase or in crisis

Findings

Country classification and world dynamics