chapter  9
11 Pages

The Federal Reserve: Between a Rock and a Hard Place

Thus profits, broadly defined, are the pivot around which the normal functioning of an economy with private business debts revolves. It is necessary to understand what determines profits. In the heroically abstract formulations we owe to Kalecki, gross profits equal investment. If government, with its possible deficits, and the rest of the world, as reflected by the balance of trade, are taken into account, then gross profits after taxes equal investment plus the government deficit minus the balance-of-trade deficit.