Economic fact - Our govt borrows the money to cover its yearly deficit. Basic economic theory - 1. If the govt creates the money to finance the deficit - might cause inflation. 2. If the govt borrows the money to finance the deficit - should not cause inflation Refined Theory. a. The dollar is used in the world economy. if the dollar economy is expanding then the govt could create some excess dollars every year and still not create inflation. b. you might argue that deficit spending could misallocate resources into some areas creating inflation in some areas where there may be shortages due to govt consumption. I would argue that this would not cause systemic inflation. c. we can discuss the impacts of monetizing the debt if necessary. I would like to thread to be a serious thread. This should not be partisan. If you challenge or support the basic economic theory I have outlined above please support your argument.
A lot of this would depend on economic conditions. Keynes argued, in summary, government spending, and deficit, should be antithetical to the economy. For example, in times of contraction the government should expand debt and spending, in times of growth the government should pay down debts and contract. In the current climate, Keynes would argue the tax cuts proposed will put the economy “out of whack”, by increasing the deficit in a growing economy and thus be inflationary. We’ll find out.
good points... It would be my idea to discuss taxes how the impact the deficit on the next Basic Econ thread.
so do the FED reserve apologists agree that When the govt borrows to fund the deficit it should not cause systemic inflation?