Oh no….is a red hurricane coming?
We still haven’t recovered from the red tsunamis in 2020 and 2022….say it ain’t so!

Republicans have already FAILED to raise the ceiling on time and are now playing chicken with the economy while also wrestling over who gets to drive the party…and not one has any idea of where you want to go yet or even how to drive (there’s absolutely no plan for what they want, just “spending cuts” which they think is SECRET code for “end social security and Medicare”)

Republicans printed 1/4 of every dollar circulating today under Trump out of thin air…actually worse, printed money as the economy was contracting as never seen before. Make more dollars without something of value to back them/you make each dollar worth less. Simple enough for even you to grasp….that’s called inflation.

Republicans totally failed at anything related to the pandemic, public health, economic, transportation, shortages, fighting against gouging, by every measure an “F-“.
Republicans pumped money in through their unregulated PPP loans and other unregulated easily defrauded programs they then defrauded by making up fake companies, taking millions, getting repayment amnesty, and buying Lamborghinis and mansions with the cash in many cases. MTG took huge sums she didn’t repay for one, then bemoaned student debt amnesty as a giveaway.

Rep(uglicans) ARE the fault of this mess as you so elegantly put it.

Odd, the Trump unsupervised PPP “loans” that Cons all took advantage of, then had forgiven (the same rich people who fought against student loan forgiveness)….that has no impact I guess?

Yeah…the timeline says no, not really. The QE and handouts happened in 2020 and early 21 as Tesla was skyrocketing, not what made them crash. You are just blathering.
Remember, you 100% denied the insane unheard of level of QE Trump did had anything to do with inflation, proving you have 0 grasp of economics.
Pumping money into the system is the only guaranteed way to cause inflation, and Trump did it more than any other president in history. He saw it as a way to spend more off the books. In fact, it was an unapproved tax on every American in the form of massive inflation you simply blamed on Biden for years. Kind of hard to swallow your sudden realization that printing money hurts the economy when you absolutely denied it when your guy printed money….over 40% of all money ever printed was printed in 2020. Where was this bob in 2020? It’s true, the money printing by Trump and to a much lesser extent Biden increased inflation significantly…but that doesn’t account for Tesla crashing twice as bad as other car companies.

He’s correct, we will end the fossil fuel industry. Importantly he gave no timeline in your clip. Reality is under Biden oil and gas production is up….but refining capacity down. The only way he could directly effect that is nationalizing oil and gas companies and forcing them to lower their profit margins to pre pandemic levels.
Reality is you were simply lied to, again, we were not a net exporter of energy under Trump. Only during the summer, in winter we imported more than we shipped out in summer. Net importers.

https://www.usnews.com/news/top-news/articles/2022-12-19/u-s-poised-to-become-net-exporter-of-crude-oil-in-2023

Since you’ve been misled, you should understand Biden only halted NEW leases of federal oil fields until the companies that want them use the leases they already have. Oil companies want to buy the fields but not drill, creating more shortages and higher prices/profits. Biden insists they make use of the land already leased before locking out tens of millions more federal acres from exploitation by their competition or any other use.

We still export oil, and import it. Our refining capabilities went down under Trump when he ok’ed the sale of the biggest refinery in America to the Saudis and they instantly cut production. In 2020, our demand went down, but not below our production.

Oil companies lost a combined $76 billion over 2020, then made over $2 trillion profits 2021 and $4 trillion 2022. Utter bullshit it’s just making their losses back. An outright bold faced lie that relies on ignorance of any facts to be believed.

Trump ok’ed the murder of American citizens by the crown prince, bragged about protecting him from murder charges. Trump gave the Saudis top secret information about dissidents in their country which they paid son in law Kushner $2 billion for then murdered them. These included people working for America.
Trump also sold the Saudis our refining capabilities without which them being pissed would make no difference if we were actually a net exporter (we aren’t, never were) and still owned our infrastructure (we don’t), the evil murderous Saudis would have no leverage at all. Duh.

Bwaaaahahaha!

Propaganda? No sir, this is the definition of entrapment being used as a deterrent to voting against only Democrats, Republican counties exempted. Not one bit made up, like your red wave….another red tsunami coming to wipe out your dreams. How’d that work out last time? ROTFLMFAHS!! You sucker.
There’s a reason even Trump started calling fraud last week before voting started, he knows his candidates are major losers, the most insulting incapable mentally defective candidates ever put up for office. They lost you 100% of independents and nearly 25% of republicans, and are already driving democrats to the polls in record numbers for a midterm.

#walkaway is real this cycle….but it’s Republicans walking away by the thousands. I personally know many that, until 2016 voted Republican across the board every election no matter what. They will never vote Republican again after Trump. D’oh!

Edit: And let’s not forget this election happens in Roevember, and Republicans made the stupid decision to ignore the long held rights of the majority and legislate for the tiny minority. It’s going to cost you the under 35 vote, and the real “smaller government, more freedom” Republicans like my family who, had they not already left over Trump, would have left the party over abortion rights.

The party that fucked America is yours, buddy. Over 1/2 of inflation is due to corporate profits going up over 50% in the last 2 years. The other half is from Trump’s policy of printing money when he couldn’t get funding for his personal ego projects, and from spending trillions in 2020 while gdp went to negative 36%!

Statistically every prosecuted voter fraud case this decade has been against Trumpist cultists or Republican candidates, sucker. (DeSantis’s blatant, now determined by the courts to be entrapment notwithstanding). You guys fucked up election integrity, intentionally, because you cannot win fair free elections, and cannot accept your losses because you’re babies.

Tool of the party…..stop with the projection, dummy. No one has been as much of an unthinking dull tool as yourself. Proof? Ashley Babbitt, treasonous anti American that deserved to be shot dead….she destroys at least two of your idiotic party positions just by existing, that’s why you cower, hide like a frightened child from the question. You know your propaganda regurgitation painted you into a corner with your toxic spew.

This idiotic, desperate “democrats want communism” nonsense….you don’t even know what communism is, moron, and you can’t point to a single policy from democrats that supports this idiotic accusation….so I’ll ask…why are Republicans wanting communism? (Your baseless accusation against your enemies means you just admitted YOU want communism fast. Very reminiscent of Republicans calling investment in infrastructure “democracy destroying socialism” then rushing to Biden on their knees, mouths open wide, begging for some of that sweet sweet socialist jizz that’s just so delicious). Yes, I’m rubber, you’re glue, but only because you speak in projection from a place of intentional ignorance, and because it’s painfully obvious to those with brains that every accusation the right makes is an admission….like calling democrats “the party of debauchery” when Republicans get caught jerking it in public to kindergarten children while in their clear view.

Ashley Babbitt, I’m so glad that, by your cowardly silence, you admit your total hypocrisy and now say she deserved to be shot point blank along with every single MAGA terrorist “fucking with police” on Jan 6. and those leading them to it….all the MAGA traitors deserve a bullet in the head says Bob.

Wow.
Sounds incredibly similar the Trump family.
Nepotism to the extreme, massive borrowing, huge financial ties to Russia and China, huge corruption and theft problems at the top, completely ignoring the plight of the quickly growing poor populace, relying on questionable at best future earnings to repay massive overspending wasted on useless wasteful projects, living lavish lifestyles as the country dwindles, printing money to pay for internal projects, causing massive inflation, refusing to leave office, ….

This could be America if Trump gets a second term. Good find, Bob.

TLDR Printing money is not a solution to anything, also it is not the reason the economy sucks.

Oh yeah, Tesla stock, isnt there a rule of thumb where youre not meant to invest more than 20% of your funds in one vehicle? (insert pun apology)

If by all-in you mean investing all your stock funds in tesla, while you own your house (land?) and keep your pension plan and short term savings and long term non-stock investments intact then go for it! May you live in interesting times!

If youre a normal country you are always living on credit, if for no other reason, then because it is super easy and cheap to borrow. Also you have to, to make it to the next pay check (tax collection). First your subjects have to produce and sell, then you can collect taxes.

You dont base the value of the dollar on anything. You offer it as a commodity to the market. If your economy sucks or you print too much money the dollar goes down, which can help the economy. Printing money doesnt automatically help the economy though, it just creates space and time to make it possible for the economy to improve.

Improving the economy means creating more or better products and services that are in demand at a competitive cost. Governments in non-dictatorial countries cant really do that directly, they can only create the conditions for this to happen.

Moderate inflation hardly plays a part, except as a moderator (is that a pun?) of shocks. Deflation (and a strong gold standard in a developing economy IS deflation) is deadly, it makes the economy less flexible, less able to adjust.

If you never improve your ecomomy, all you will have left will be to bitch about inflation.

What is too much debt, too much inflation, too much intervention? I wish economics was a science.

Theoretically the economy can get to be so bad that the structure collapses, there are countries which have notoriously bad historical records, and yet every time they restart they have to borrow money to get things going again. Reserves in general are useless. Production, services and a functioning market, recursive production of valuable goods and services which freely and easily find customers is the only thing you can consider a reliable pillar of civilization. Currency is one of those goods and services.

If for any reason yor currency cant freely circulate (see China or the USSR errr... Russia) you can hardly be a superpower, at least not in the economic sense.

Adopting a gold standard so strong that it would destroy the international dollar standard has no advantage for the USofA or for any developed first world country. Even just having the Euro wreaks havoc in weaker European countries economies, but that is another can of worms.

A lot of what is wrong about the gold standard would apply if a country decided to adopt bitcoin as its sole currency btw.

No.
IMO….The fed printing money is (one reason) why the economy is a disaster.
Every dollar the fed prints makes every dollar worth less….and eventually worthless.
The fed keeping a moderate reserve and releasing some to stabilize the economy AND RECAPTURING IT LATER keeps economy swings moderate. (You just have to not listen to morons who don’t ever want to rebuild the reserve because it cools off hot economies, and instead they want to live on credit).
Printing money is NOT a permanent solution to not having enough money, and doesn’t keep the economy stable long term. Ask Venezuela.

Basing your dollar’s value on gdp means another 2020 and it might disappear altogether instead of just seeing high inflation for years….no advantage there

No!

A gold standard provides none of the perceived advantages.
There was never any stability under a gold standard.
Unless its just a Bretton-Woods type "gold" standard where the gold is symbolic. The fed printing money is what keeps economy swings moderate.

Lol. Yeah, in your own mind. You can’t write a single sentence without proving that wrong by sounding like a first year English student or worse. You not smart guy…you unsmart guy. Unsmart guy who like lies and liars and hate factses.
Sweet zombie Jebus, you moron.

Bob, they went on TV and said it. You don’t even have to read, just not hide your head in the sand…sadly that’s still too much to ask of you. God forbid you actually know what the party you blindly support is planning.

https://www.businessinsider.com/mcconnell-no-republican-legislative-agenda-before-2022-midterm-elections-2021-12

Historic Unemployment levels are way down. Historically negative GDP now up. My portfolio went up >25% in 6 months, under Trump it went down over 10% in 4 years. I have a diverse portfolio. Biden got serious funding for real infrastructure repair, not some vague promise of infrastructure week used as a distraction from innumerable scandals but never actually happening, not even for a week. Our international standing is on the rise after falling like a stone under Trump. Biden is doing fine…much better than Trump on his best day. Expectations are low with Republican obstruction a given and some “Democrats” being Republicans in practice.

Biden didn’t attempt a democracy ending coup. Trump did. That alone means Biden wins the “good job” medal 100-0.

Biden’s votes are all valid, Trump has dozens of voters caught voting more than once, and who knows how many not caught. There was voter fraud, 100% Republican voter fraud. How many senators won by cheating. If I used your (lack of any) metric, I would say every Republican representative is invalid and should be removed and jailed. D’oh!

Trump was a mess….an unmitigated failure at everything he tried. He inherited a healthy economy and nation, he left a recession, pandemic, and deep, DEEP division that already tried to destroy American democracy based on his lies.
Trump’s legacy is 3/4 million dead, economy in shambles, allies turning away, and the union crumbling…what you call an unmitigated success.

Edit: some light reading, since inflation is so important to you now…keep in mind the fed “created” over $4.5 trillion in 2020 alone to pay for Trump’s failures. (A dollar devaluation equating to 25% inflation long term)
https://money.cnn.com/2016/05/11/news/economy/donald-trump-print-money/

Newt,

This is in response to your comment on my statement about Biden needing to lose in '20.

I recently wrote this as a reply to one of my readers (I write under a number of different names in other places).:

Dear <name>,

>I took some time to absorb what you wrote. It's a lot to juggle. The Atlantic has an article in the July-August issue on the worst and best case scenario in CLO defaults. I'll read more.

I read the article you mentioned, and while it's certainly good, it also misses a very important point that explains the mess we're in: the collapse of Lehman and Bear-Stearns, while catastrophic in their own ways, were not the nightmare that caused the Fed to freak out in 2008 -- AIG was. Had AIG gone under and the counterparty default contracts triggered, we'd be on the barter system right now. We came within hours of not having an economy in the western world. The $700b ($.7t) the Fed coughed up to stop this from happening calmed the panic, but did nothing to resolve the underlying issues. These issues continued to compound during the 2011-2020 stock run-up and now we're at the point where the Fed is throwing trillions of dollars at every piece of bad debt they can find just to keep the whole thing from imploding into an economic black hole. It is important to note that in September '19, the credit markets started freezing because of the debt that was already on the books then, -before- CV-19 started rolling, and it took $3t just to get them unlocked again. Absolutely nothing has gotten better since then, and I would argue things have gotten dangerously worse.

In an odd coincidence, the NYT ran an article today about the looming bankruptcy crisis. They're calling for 30-60 days before things start imploding, but I'll stick to my estimate of ~90 days. There's some talk about extending the $600 benefits (we'll see) and chatter about another stimulus check, but that's kicking the can as well as telegraphing how bad things really are. When the Republicans are getting behind free money, you know we're in some uncharted territory. For all intents and purposes, Modern Monetary Theory (MMT) -- the reason the Fed is backstopping debt and printing money like crazy -- is the hill the US economy will live or die on. Should the US dollar come unpegged as the world's de facto currency or should inflation begin (and there's already worrying signs this is happening), that's game over.

Please don't take anything I say as the Word of God; please do your own research and come to your own conclusions. Everything I've said is an opinion based on my education, experience and way of thinking. Your mileage may vary.

Here is the article I mentioned: https://www.nytimes.com/2020/06/18/business/corporate-bankruptcy-coronavirus.html -- might be paywalled, but clear your cookies for the NYT and you should be able to read it.


>Frankly, it's the physical danger in my area of the States that concerns me. There are the guns and bullying. During some BLM demonstrations in the Midwest, locals were standing around with semi-automatics. I drive a Prius for the fuel efficiency. Pick up trucks enjoy tailgating, trying to intimidate me. This behavior isn't going to change with a change of President but will get worse is we don't change. This ideological push to takeover the country instead of ruling by compromise started around the same time we came to the US in 1981, Reagan's first year. I was so shocked when I heard talk radio for the first time; this wasn't the country I had left in the 1970s.


And now we come to the giant pile of sweaty dynamite that's just waiting for the right shock to set it off. I could give you a prolonged lecture about how this all started in 1978 with California's Proposition 13, or how David Stockman's tragically prescient warnings were blatantly ignored, but Haynes Johnson does a far better job at this than I ever could in his 1991 book "Sleepwalking Through History", as does Kevin Phillips in 2006's "American Theocracy". Honestly, at this point, the prelude is academic. The reality of the situation is that a large swath of adult Americans are appalling ill-educated, innumerate and devoid of even the most basic critical-thinking skills. These people are now locked out of the Information Economy. They lack the most basic skills required to compete in the 21st century job market and thus will watch their standard of living sink into the abyss. These people are not blind to this fact because they're living with the reality of their situation every single day. They're totally without hope, cut off from all avenues of control over their own lives and they feel utterly abandoned by the very people who're supposed to be helping them. The reason you're seeing bullying and behavior like that is because these same people are totally removed from any avenues of recourse and the only people they can take their anger out on are people like you and me. Their anger is being stoked on a daily basis. FOX News and the GOP are experts at this and have a host of boogeymen to keep the anger from being pointed their way: ANTIFA, BLM (black Americans have always made a perfect target), "coastal elites" and, of course, Liberals.

Trump's election was a warning, not an outlier. Trump was the primal scream of these people and Liberals and the Democrats as a whole chose not to listen because they found the sound so abhorrent. The rage will only get worse and the number of people enveloped by this rage will only grow as economic conditions worsen. At this point, it no longer matters who wins in '20. Winning the election will be like winning the deed to the World Trade Center one second after the first jet hit. The damage has already been done and no steps are being taken to repair it; if anything, people are actively making it worse either through ideological blindness, deliberate malfeasance or outright stupidity. It took almost 50 years to get to this point and the endemic issues will not be undone in a single generation, much less a single election. Until the people who voted for Trump feel a sense of real hope, a sense of control over their lives and a genuine expectation of recourse for their grievances, they will keep right on voting for Trump, or people like him.

My unfortunate suspicion is that this country will rip itself to shreds long before those reforms are enacted.

Side note: the fundamental difference between the United States and Europe is that European history has forced the nations of Europe to live with the consequences of their actions. Not so the United States. Europe has suffered for her sins. Not so the United States. The two bloodiest wars in human history were fought on European soil. Not so the United States. The United States has never faced true suffering, nor has it ever had to live with the ramifications of its own actions. Both these facts are about to change and a nation whose character is built on a mythology of individual action and violence is going to have to face reality. The people of this nation are not prepared for this and they will not like it.

Second side note: many people are erroneously comparing the current situation to the Wiemar Republic. This is a lack of historical understanding. A more apt comparison would be to Spain in late 1935.


>As for re-opening, we could have gotten some control if the "leader" had simply donned a mask and used realistic thinking. People could go back to work more safely, wash hands, stay a certain distance. But his hubris led the way, so now we'll have a roller coaster for months and years that will affect the economy even more. France is a good comparison because they were unprepared also, having slashed the public healthcare budget for the last twenty years. But when they laid down the rules, troops patrolled the streets to be sure they were followed. So far, they've flattened the curve (for now), and used different economic incentives, such as paying part of employees' salaries to keep them employed.

At this point, the pace of re-opening is a difference between very bad and much worse. Had $3t been used to pay the yearly salary of every American, we could have saved lives and the economy, but we didn't. The history of 2020 will be littered with "what-ifs". However, the first thing you learn when studying history is that what-ifs are useless because things are what they are and you can't change that. It's already obvious we're going into a second wave. If previous pandemics are any indication of what's to come, this second wave will be many times worse than the first. The wait for a vaccine is indeterminate, but if we're going for herd immunity, ~70% of Americans will need to catch the virus. To date, ~1.5% have. If the US population is ~330 million, ~230 million will need to catch the virus. Call the mortality rate 2%, that means ~4.6 million Americans will die. That's a lot of dead Americans and grieving families.

Take care,

(my actual name)

And when times are good you continue to add more debt, just not as much, right? This video perfectly illustrates the situation. The only difference is this guy could one day not get a loan. The US might not be able to sell debt to other countries(or at too high an interest rate) but it can always print dollars. I think the responsible method should be to simply print the deficit yearly to spend it and if inflation increases, let people complain until the politicians stop printing money. The one thing usually not mentioned is the percentage of the budget spent paying interest on the debt, which keeps creeping up every year.

The Donald said something sensible:
http://www.vox.com/2016/5/9/11639292/donald-trump-default-print-money

To quote the St. Louis Fed, again: "As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills."

So just perpetual expansion for ever and ever? I don't know why having a balanced budget is such a bad thing. Increasing the money supply simply devalues all the existing money, essentially a property tax.

I wish she had used some real numbers, say it's 2030 and the debt is 26 trillion, and you are starting to get some huge deficits to pay for social security. Keep borrowing and by 2050 pay 50% of your budget in interest payments? Start printing money and by 2050 have an inflation rate of 8%? If the gov't needs to run continual deficits, why not just keep a balanced budget then drop cash out of helicopters on the 4th of July? Same money added to the system.

Really disappointed she didn't mention the Federal Reserve. Why is the US paying interest to a private entity that creates money out of thin air? Are they more credit worthy than a government that can also create money out of thin air?

@radx @enoch @eric3579

For one thing, give the executive or legislative power over the printing press in a crisis and they will not willingly give that power up and end up abusing it. For another, if you're simply printing money to spend then you depreciate and inflate your currency commensurately, at least in the long term. Relying heavily on this is the kind of thing that Venezuela does. There's a reason that governments instead take on their fiscal spending as debt. On that I would say, I've also become much more skeptical of fiscal stimulus in general but particularly in corrections or recessions. I'm okay with automatic stabilizers (unemployment benefits, the largely limitless kind with strings attached we have here in Australia) but not so much direct fiscal stimulus.

The fundamental issue to me is large, even extremely large fiscal spending will not affect business confidence levels of economic conditions. There is some fiscal multiplier effects (the multiple of the effect on national income over the spending injection by the government) but the worse economic conditions are, the lower this will be. Also, yes with say infrastructure spending, you're creating immediate jobs. Problem is these are in no way permanent jobs and simply pushes the can down the road on them finding new employment. Better to provide unemployment benefits and training to get them into a more permanent job faster.

Also large bouts of spending (again to use infrastructure as an example) tends to be hugely wasteful. Good projects require appraisals, consultation and careful planning. The notion of handfuls of 'shovel ready' projects is a political myth. You can instead span it out but then you don't get the mooted fiscal boost. In fact I would argue infrastructure spending is never appropriate as fiscal stimulus. It should be in a constant, planned process of improvement irrespective of business cycles or downturns. The US stimulus under Obama was largely long term spending projects like this as giveaways to the states. There is little evidence it eased the recovery or altered behaviour though. Many states simply enacted the same civic projects they would have otherwise and used this money instead of issuing debt like they would have otherwise - effectively they saved on interest.

So what are the alternatives then? The government here in Australia also heavily spent on roads, home subsidies and schools but notably also gave all income earners a cash deposit of AUD $300-950. The latter is probably the closest you can get to a pure fiscal stimulus - immediately cash to spend, injected not into banks than might save it but given particularly to low / medium income earners most likely to spend it. Again what we saw is that it hardly altered consumer / household behaviour. Many saved it, many spent it on large one off purchases (e.g. TVs, in which case most of that value was transferred overseas). So we gave a dollop of cash as stimulus to the global economy of which Australia is a drop in the ocean. Basically my attitude is, if you maintain good infrastructure, effective education systems, adequate but efficient regulation, reasonable tax rates, and importantly competitive markets, the best way to get through a crisis is to let the market stabilize by itself. Provide assistance and retraining to workers who lose their jobs by all means, but don't expect government spending to be some kind of savior.

I agree on the inflation aspect of your post. There were certainly no shortage of self-declared monetarists buying up gold in anticipation of high inflation, but as you say dollops of cash in the economy are meaningless if they are idle and the economy under capacity. The question now with unemployment in the US at 5.5% whether capacity is finally pushing LRAS levels. Probably not, participation rate is low and falling, and the unemployment rate is woefully underrepresenting forced part timers. Also as you mention the dip in oil will temper prices on the input cost side. The Fed certainly seems to think so and has started tightening rates but as so much commentary in the investing world is saying, this may turn out to be a mistake and they may end up having to reverse course.

Apologies, I got carried away... wall of text incoming.

@RedSky

I agree, monetary policy at low rates has very little to offer in terms of economic stimulus. Then again, the focus almost solely on monetary policy is part of the problem. Fiscal policy can have a massive impact, both directly (government purchases of goods and services) and indirectly (increase in automatic stabilizers). But for that you either need to be in control of your central bank, so that you can engage in Overt Monetary Financing ("printing" money). Or you need the blessing of the private banks, which is particularly true for a Vollgeld system.

The budget is the core of a parliamentary democracy, and to be at the whim of the folks at Deutsche Bank, HSBC or Credit Suisse -- no, thank you very much. We saw how that played out in Greece.

Anyway, the central bank can do miraculous things: if it provides funds to the democratically elected body in charge of the budget, aka parliament/the government. Trying to "motivate" the private banks to stock up on cheap reserves to stimulate lending is just a sign of ideology.

The great Michal Kalecki, in his essay The Political Aspects of Full Employment, summarized the general issue of government spending quite clearly. The industrial leaders stand in opposition to government spending aimed at full employment for three distinct reasons: a) dislike of government interference in the problem of employment as such; b) dislike of the direction of government spending (public investment and subsidizing consumption); c) dislike of the social and political changes resulting from the maintenance of full employment.

I'd say control over your currency is too great a tool to leave it in the hands of unelected managers. Clement Attlee knew very well why he had to nationalize the Bank of England in '46.

Back to the issue of inflation, I'd like to make two points. First, how big a role should inflation really play when talking policy. Second, what's the influence of a central bank on inflation.

Where does it come from, this focus on inflation. People usually talk about government spending when discussing inflation. Private spending is rarely brought up, even though it can be just as inflationary. So let's ignore private spending for a moment and talk purely government spending: should a deficit/surplus not be judged primarily by how well it helps us achieve our macroeconomic goals? Or more clearly, why should we sacrifice full employment or our general welfare on the altar of inflation? Yes, that's over the top. But so is the angst of inflation.

I'd say let's stick with Abba Lerner's concept of functional finance and judge deficits/surpluses purely by how well they help us achieve our macroeconomic goals. Besides, the US has run massive deficits during the GFC, so much in fact, that a great number of monetarists saw hyperinflation just around the corner. Still waiting for it. Same for Japan. Massive deficits... and deflation.

As long as spending, both private and government, doesn't push the economy beyond its limits (full employment, real resources, production capacity), out-of-control inflation just doesn't materialize. Plus, suppressing inflation is actually one thing central banks can do quite well. Unlike causing inflation, which both Japan and the EU are showcases off. Draghi can dance naked on the table, monetary policy (QE, mainly) won't push inflation upwards.

Which brings me to the second point: what's inflation, what's the cause of inflation, how can central banks manipulate it.

CPI is often used as a measure of inflation, but I prefer the GDP deflator. CPI doesn't account for externalities that you cannot influence, whatever you do. Prime case: the price of oil. Monetary policy of the Bank of Sweden has no influence on the price of oil. The GDP inflator, however, accounts for every economic activity within your currency zone -- much more useful.

General theory says, this measure of inflation goes up when demand surpasses supply. And vice versa. The primary factor of demand is domestic purchasing power, therefore wages. If you suppress wages, you suppress inflation. If you push wages, you push inflation. More specifically, you can see a direct correlation between unit labour costs and the GDP deflator in every country at any time. Here's a general graph for multiple countries, and the St. Louis FED provides a beauty for the US.

That's why it's easy for central banks to combat inflation, but almost impossible to fight deflation.