You make it sound like a law of nature when it really isn't. Look at Italy for a prominent counter example.
Didn't Italy get the Germans to take the fall for their deficits a few years ago?
Put another way, if inflation is 10% then you get 10% more tax dollars in, to offset the loans.
Of course _never_ actually paying them back is even cheaper :)
In practice the government going into debt denominated in its own currency, and printing more of its own currency are essentially the same thing.
Mechanically, when the interest rates go higher the Fed policy, the fed just buys the debt itself, driving up the market price (therby down interest rate). In effect, this converts US debt into cash. Similarly, they can sell treasury debt, driving up the interest rate.
It is just a quirk of bookkeeping that the we keep track of how much money the treasury owes the federal reserve.
The stimulus check represented 804 billion dollars in direct to citizen spending of the government's 6 trillion dollars in spending. If your argument is "giving money directly to individuals causes inflation" we can start there, but government spending alone does not cause inflation; the Emergency Economic Stabilization Act did not meaningfully grow inflation.
We probably would not know fully in 5-10 years, but my own hypothesis is that America had it's own dark labor pool of incredibly cheap labor and when (1) Citizens were allowed to have some breathing room and look for better oppurtunities and (2) the CBP used Covid to massively ramp up deportations, labor became more expensive which clearly affected the rest of the economy.
I didn't say that, either. I was clearly talking about deficit spending.
I wish people would stop adding words to my statements, and then arguing based on the added word.
In this case, "directly".
> In fact, before 2020, there is no modern economy where you could clearly point to and say "the government overspent, and caused massive inflation".
Did you forget the 1970's United States?
Expanding on that, from 1800 to 1914 the US had zero net inflation. Zero. We've had inflation ever since. What changed in 1914? The switch to a fiat money system, which enables endless deficit spending.
The same thing happened with every other country that switched to fiat money. Yes, I know about Japan, but not much about it. I did read that they have no GDP growth. The lack of inflation could be because people simply stash their money in the bank, keeping the excess money out of the economy.
This is simply false [1].
[1]: https://www.minneapolisfed.org/about-us/monetary-policy/infl...
Also, I don't mean exactly zero. It's an inconsequential difference spread out over more than a century compared with 1914 to today.
My take on it is that it's like physics - if you conduct an experiment and determine that the laws of physics don't apply, you've either made a mistake or our understanding of physics is all wrong. Which is much more likely?
My take on the 2009-2021 not causing huge inflation is there was something else going on. Two possibilities:
1. quantitative easing deferred the inflation to the future. There's been a lot of talk in the last few months about it putting the whole financial system onto another precipice.
2. That it did cause inflation - it's just that it compensated for massive deflation caused by the banking collapses.
Or maybe the 25% inflation we see today is just a delayed effect.
(Yes, I know the official rate is 7.5%. But everything I buy seems to have gone up 25%.)
How else is someone supposed to interpret "That has to happen. The government cannot deficit spend for free. The cost is inflation" and "It is a law of nature."? Now it's not direct, but happens through the ether. I can also argue inflation happens whenever my dog sees his shadow.
We've gone from "It's a law of nature" to "only when the government does deficit spending" to "only when the loans aren't paid back" to "it's not direct".
>What changed in 1914? The switch to a fiat money system, which enables endless deficit spending.
What's the argument here? That the Unites States should revert to producing cotton? That the United States should return to having a smaller economy than 1920's India? The amount of economic change between 1914 and now; as well as the intentional effects of inflation on US investment absolutely dwarfs any comparison you are trying to make. Zero net inflation is not a desirable thing on it's own. This is a luddite argument; in lieu of actually providing evidence that hyperinflation is a direct consequence of deficit spending, you've simply argued we should to return to living like cavemen. It's like seeing a car crash and pointing to the invention of the Model T as the downfall of modern society.
If the economic laws are so clear cut as you claim there shouldn't be ambiguity; and yet here we are as you struggle to even clearly explain why the "laws of nature" were so clearly upended in 2008.
If Italy really got the Germans to take the fall for their deficits a few years ago and suffered no negative effects from it then there would be a free lunch at the macro level as well, although I find that unlikely.
Nobody said they didn't suffer negative effects from it.
Reconsidering things on the macro level I think while there may be no free lunches there are obviously lunches that coincidentally may be so cheap that they are next to free.
For example: aid received from France by Americans during Revolutionary War, treaties signed said supposed to be paid off by Americans siding with France in case of war between France and England, but since French Government changed since time of treaty signing when war came America said oops sorry, we're staying out. That was a really cheap lunch.