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  • The following explanation is taken from this link:

    the deficit aviary

    Deficit owls believe that there is no structural deficit, and that most of the present deficit will go away when the recession ends. They also believe that in times of unused productive capacity like these, deficits are caused by the state of the economic system and that explicitly managing them by taxing more or spending less will not improve its condition, but only result in a downward economic spiral making conditions still worse. On the other hand, if real economic problems like unemployment, alternative energy capacity and production, infrastructure renewal, education, and industrial innovations are addressed through Government spending, then aggregate demand spurring private sector business activity ending the recession will result, and the deficits will largely go away except for those resulting from excessive private sector saving in the economy. In addition deficit owls believe that in a fiat money system, where there is no debt in foreign currencies, and no “peg” to such currencies, solvency is never a problem for the Government, and that while inflation partly caused by Government deficit spending can become a problem in such a system, this can only happen when full employment is achieved.

    July 22, 2010