Debt Is Not A Reserve Asset

Debt Is Not A Reserve Asset

Daniel Lacalle 16/01/2020 5

Upside-down economics’ defenders say that deficits create savings.


The process never starts with deficit spending, but with the assets and wealth of the economy, which can be leveraged only to a certain extent and never decided by the borrower but the lenders.

Borrowing is never the first step neither endless.

Saying that governments issue financial assets that create savings is as incorrect as believing that a company that constantly issues shares generates wealth. Diluting wealth is not the creation of savings.

Deficit spending is borrowing. Either it destroys the citizen’s savings via inflation monetizing the deficit or destroy it with higher taxes in the future.

Deficit spending is not “supplying a good” but extracting others’ wealth (via higher taxes or inflation in the future).

If deficit spending created citizen savings global debt would be zero. Complete nonsense. Deficit spending does not create savings, it extracts future and current wealth via inflation or higher taxation in the future.

Government deficit spending confiscates private wealth.

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  • Dylan Peters

    I estimate that about 80% of the population has zero understanding of the federal budget.

  • Julia Richards

    Enough said :)

  • Daniel Eaton

    The debt will never be paid off.

  • Thomas Hickey

    We've already reached the tipping point.

  • Kirsty Rowan

    Thanks for being honest on this.

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Daniel Lacalle

Global Economy Expert

Daniel Lacalle is one the most influential economists in the world. He is Chief Economist at Tressis SV, Fund Manager at Adriza International Opportunities, Member of the advisory board of the Rafael del Pino foundation, Commissioner of the Community of Madrid in London, President of Instituto Mises Hispano and Professor at IE Business School, London School of Economics, IEB and UNED. Mr. Lacalle has presented and given keynote speeches at the most prestigious forums globally including the Federal Reserve in Houston, the Heritage Foundation in Washington, London School of EconomicsFunds Society Forum in Miami, World Economic ForumForecast Summit in Peru, Mining Show in Dubai, Our Crowd in Jerusalem, Nordea Investor Summit in Oslo, and many others. Mr Lacalle has more than 24 years of experience in the energy and finance sectors, including experience in North Africa, Latin America and the Middle East. He is currently a fund manager overseeing equities, bonds and commodities. He was voted Top 3 Generalist and Number 1 Pan-European Buyside Individual in Oil & Gas in Thomson Reuters’ Extel Survey in 2011, the leading survey among companies and financial institutions. He is also author of the best-selling books: “Life In The Financial Markets” (Wiley, 2014), translated to Portuguese and Spanish ; The Energy World Is Flat” (Wiley, 2014, with Diego Parrilla), translated to Portuguese and Chinese ; “Escape from the Central Bank Trap” (2017, BEP), translated to Spanish. Mr Lacalle also contributes at CNBCWorld Economic ForumEpoch TimesMises InstituteHedgeyeZero HedgeFocus Economics, Seeking Alpha, El EspañolThe Commentator, and The Wall Street Journal. He holds a PhD in Economics, CIIA financial analyst title, with a post graduate degree in IESE and a master’s degree in economic investigation (UCV).


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