Why can’t a household be more like a bank?

The short answer to this question is of course that householders don’t issue their own money.

But banks do.

So perhaps we should be complaining less about the household analogy that is the bugbear of a proper understanding of how the economy works  – and suggesting another more fitting analogy.

A government with a sovereign currency is more like a bank.

There are other similarities – issuing money is good for business, indeed is the business.

Unlike a household, a bank doesn’t put money away for a rainy day into savings – it invests. Just as a competent government ought.

And a bank doesn’t want to be in surplus with extra money sloshing around in its coffers. Good business relies on the bank being in deficit.

So the government is like a bank.

Perhaps this analogy might yet get people thinking about banks – as well as about the government and the economy!