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Absent persistent fiscal deficits and unsustainable foreign positions, the private sector will still have equity (Robinson Crusoe can still stockpile coconuts). It just won't have any net financial position (Robinson Crusoe can't stockpile pound sterling).
Since the private sector usually wants to stockpile financial assets (particularly sovereign financial assets), to provide a cushion against future expenses in the only asset class that is guaranteed by law to cover certain types of expenses, not allowing it to obtain a net financial position is usually Bad.
Austerity can only be implemented in the shadow of a concentration camp.
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