Key Points
- Commerce Department indexes that the Fed relies on heavily for inflation signals showed prices continuing to climb at a rate still considerably higher than the 2% annual goal.
- The stubborn inflation data raised several ominous specters, namely that the Fed may have to keep rates elevated for longer or even have to hike at some point.
- Thus far, the economy has managed to avoid broader damage from the inflation problem, though there are some notable cracks.
There is not much evidence that a rich country growing deficits* causes inflation. Russia and Japan are recent examples.
*growing deficits = throwing money into the economy
Markets are real as in they exists and the free market was a historic idea used by capitalists to explain why the 19th governments shouldn’t interfere with them. But as a consumer living in the 21st century, the free market might as well be a fairytale. But if you still believe, who am I to bring you down.
I’m not really making an argument about what should be done, or the usefulness/applicability of the term ‘free market’
Not sure that’s really equivalent since deficit growth could also be contributed to by other factors, like reduced revenue. It’s also not a fair expectation that government spending should always be followed by a rise in inflation, because that spending is likely to be an intentional stimulus effort made to counteract expected forces going in the other direction.
Could you say more about why you think Russia and Japan’s recent history represents evidence (I’m assuming you meant this instead of absence of evidence which would be confusing) that spending does not cause inflation? I haven’t been following it much, but I heard Japan’s currency is devaluing hard against other currencies atm.
Google Japan’s inflation and gdp vs debt ration since the 90s. Why are they more afraid of deflation than inflation.
Russia is under sanctions and is waging a costly war. They managed to drop their inflation and grow their economy with higher government spending.
Countries will all face economic issues at times, but inflation due to government spending is not something leaders of rich countries actually worry about.