But that is not at all what profit is about. Because neither A nor B made any profit when A borrowed from B. It is a loan. It will be repaid. A having more is a temporary situation. Do you think that Apple and other profitable companies just sit around borrowing money from someone? Is that what makes them profitable? The mind boggles at such thinking.
First, I am going to substitute surplus for profits since that is more precisely the counterpart to deficit. Now what constitutes a loan? Something you must give back or something that can only be exchanged for something from the same party? If the former, then I suspect MMTers would contest that the government’s deficit constitutes a loan. They don’t believe the government must give back the money. As for the second, let’s look at the Apple scenario. Apple creates a surplus of money by creating a deficit of goods (i.e. non-money). This transaction also makes non-Apple have a surplus of goods and deficit of money. What can Apple do with its surplus of money? Only one thing: exchange it back to non-Apple for goods. Thus, in this sense, Apple’s profits do represent a form of credit, a form of borrowing and lending.
True profits do not require A borrowing anything from B. What happens is that A profits by being productive. Not by borrowing money, not by the govt running a deficit, not by anything related to money at all. A makes stuff that people want. If they want it so badly they are willing to pay him more than he laid out in making it, he can sell it for a profit. [Of course, money need not enter the picture at all. A might have a bunch of wooden logs nobody will give him anything for. If he whittles them into a usable canoe, he may find someone willing to trade with him, taking the canoe and giving A a cask of beer. A has profited from his labors].
If the results of productivity can be considered a surplus, then there must be an offsetting deficit. If the canoe can be considered a surplus, then the loss of the wooden logs would be considered a deficit. Of course in this example, it’s not really possible to convert the latter back into the former. You say that A has profited from his labor. Thus, his labor (along with the lost logs) represents his deficit. There cannot be a surplus in one area without a corresponding deficit in another. Surpluses don’t just appear spontaneously.
Indeed, it possible for everyone to make a profit in an economy. A makes canoes, B makes beer. Before they labored, they could not trade the wood or the water and hops etc for something they wanted. After they work and make a canoe and a cask of beer, they can trade it for stuff they want. Both have profited.
True, everyone can profit if their profits are measured in different things. But when we talk about a surplus and a deficit, we are concerned with the relation of a particular entity between two parties.
If money is involved, A has $2 worth of wood before he works. After he works he has a $200 canoe. He has profited $198. I leave it as an excercise to make up numbers for B and his situation.
I see why you didn’t finish this example. Here you actually began to look at the relation of a single entity among two parties. If you followed through on the example, you would see that the exchange creates a surplus of money for one person and a deficit of money for the other.
Let me use an example that Austrians would like. Let’s imagine an economy without any currency. How might a state create currency initially? How about the government agrees to hold private sector gold and issues notes in exchange. Let’s say $1 equals 1 lb of gold. The private sector gives the government 10 lb of gold in exchange for $10. Now, has the government run a deficit? Yes! The government owes the private sector 10 lb of gold. The government is 10 lb in debt. Thus, the only way that the money supply can increase, the only way that the private sector can realize a surplus of gold, is if the government takes on more debt in gold. Likewise, the private sector can only realize a surplus in money (that is, not possess money but have money credited to it) is if the government takes on more debt in money. Of course the private sector can have money without there being a government, but if there is a government and if that government can be said to run a deficit, then it must also be said that the private sector is running an equivalent surplus.
If the title of this thread is really false, then tell me: what is the equivalent surplus of the government deficit? If the US government is $10 trillion in debt, then who does the $10 trillion credit go to if not the private sector?