"It's also possible for inflation to INCREASE [an editing glitch?] (or remain elevated) even in
the presence of a rapidly falling deficit or a growing budget surplus."
Exactly. Let's try this thought experiment. Pre-pandemic, the so-called "national debt" (accumulated annual federal deficits) was about $28 trillion while inflation was running at or below 2%. How could these 2 seemingly competing facts be true at the same time? Part of the explanation is surely that an enormous chunk of that $28 trillion was captured (a la Thomas Piketty) by the top 1%--who, because they have more money than they can reasonably spend, have a high propensity to save. A dollar NOT chasing goods and services doesn't fuel inflation.
But suppose the gov't decides that, even though it really doesn't need their money, it is going to tax the uber wealthy to reduce their political clout while at the same time helping out the little guy. So the gov't claws back $1 trillion in taxes from the rich (don't think of it as "revenue" because the money gets applied to debits in the Treasury's account at the Fed and the money simply disappears) and then issues ARP checks (new money created out of thin air) to low-income Americans totaling $500 billion. The deficit has just been reduced by $500 billion, but what is your prediction about the inflationary effect of those ARP checks? Well, if the economy is already running at full capacity, then this injection of $500 billion (low-income recipients will spend every penny of it) has to juice up inflation. So here it seems we have a case of LOWERING the deficit is INFLATIONARY.
And doesn't this example highlight a fundamental injustice in the way our economy works? The poor can't win for losing.
There have to be other measures than have been discussed to curb the Hedge Funds interfering in the Housing market, rich corporations raising costs with Stock Buybacks, lack of competition in the food markets, and the growing gap between the rich and the poor which leaves our economy totally schewampus.
"It's also possible for inflation to INCREASE [an editing glitch?] (or remain elevated) even in
the presence of a rapidly falling deficit or a growing budget surplus."
Exactly. Let's try this thought experiment. Pre-pandemic, the so-called "national debt" (accumulated annual federal deficits) was about $28 trillion while inflation was running at or below 2%. How could these 2 seemingly competing facts be true at the same time? Part of the explanation is surely that an enormous chunk of that $28 trillion was captured (a la Thomas Piketty) by the top 1%--who, because they have more money than they can reasonably spend, have a high propensity to save. A dollar NOT chasing goods and services doesn't fuel inflation.
But suppose the gov't decides that, even though it really doesn't need their money, it is going to tax the uber wealthy to reduce their political clout while at the same time helping out the little guy. So the gov't claws back $1 trillion in taxes from the rich (don't think of it as "revenue" because the money gets applied to debits in the Treasury's account at the Fed and the money simply disappears) and then issues ARP checks (new money created out of thin air) to low-income Americans totaling $500 billion. The deficit has just been reduced by $500 billion, but what is your prediction about the inflationary effect of those ARP checks? Well, if the economy is already running at full capacity, then this injection of $500 billion (low-income recipients will spend every penny of it) has to juice up inflation. So here it seems we have a case of LOWERING the deficit is INFLATIONARY.
And doesn't this example highlight a fundamental injustice in the way our economy works? The poor can't win for losing.
There have to be other measures than have been discussed to curb the Hedge Funds interfering in the Housing market, rich corporations raising costs with Stock Buybacks, lack of competition in the food markets, and the growing gap between the rich and the poor which leaves our economy totally schewampus.