"If markets doubt that future taxes will cover today’s deficits, the price level adjusts until the real value of debt falls to match expected repayment."
Somehow I doubt that up until January 2021 markets were expecting future taxes to cover all the pre-2021 debt. But even is they did, price levels cannot rise without Fed validation.
Yes, up to the point that the interest rate needed to hold inflation to target causes more damage than the inflation. But this is not to say that the deficits are harmless up to that point. Deficits in excess of productive public investment shifts resources from investment to consumption and that is bad however well the Fed may be managing inflation and employment.
"If markets doubt that future taxes will cover today’s deficits, the price level adjusts until the real value of debt falls to match expected repayment."
Somehow I doubt that up until January 2021 markets were expecting future taxes to cover all the pre-2021 debt. But even is they did, price levels cannot rise without Fed validation.
"The great inflation we just lived through was a fiscal event, not a monetary one. "
Thanks for stating this error so clearly. Friedman has not been cancelled: inflation is every where and always a monetary event.
Here is a longer version of my dissent: https://thomaslhutcheson.substack.com/p/including-monetary-in-monetary-fiscal
Yes, up to the point that the interest rate needed to hold inflation to target causes more damage than the inflation. But this is not to say that the deficits are harmless up to that point. Deficits in excess of productive public investment shifts resources from investment to consumption and that is bad however well the Fed may be managing inflation and employment.
Where are all the MMT scholars these days?
Taking victory laps after passage of the One Budget Busting Bill.