1. The Basics of Macroeconomic Accounting

In this chapter we are going to begin to build the necessary foundation to understand modern money. Please bear with us. It may not be obvious at first why this is important. But you cannot possibly understand the debate about the government’s budget (and critique the deficit hysteria that typically grips most nations) without understanding basic macro accounting. Nor can you understand the problems in Euroland—which have to do with the set-up of its monetary system, not with the supposed profligate spending of lazy Greeks, Spaniards, and Italians. So be patient and pay attention. No higher math or knowledge of intricate accounting rules will be required. This is simple, basic stuff. It is a branch of logic. But it is extremely simple logic.