Feel free to cite some data and analyze it. But I think that if there really was the kind of relationship between deficit spending and inflation as had been postulated in the United States it would show up in the associations I looked at. Think about what happened between Carter and Reagan. Double digit inflation was a significant factor in Carter losing. And inflation did decline after he left office. But it declined while deficits were generally increasing dramatically.UNI88 wrote: ↑Thu Nov 11, 2021 2:03 pmOnce again you might be too focused on macro-data. Is it best to compare annual inflation to deficit as a % of inflation or should you be looking at what happens to monthly inflation after major spending bills are implemented? Does the start of a big government outlay juice inflation? Is that a better indicator of the impact of a particular POTUS & Congress on inflation at the time.JohnStOnge wrote: ↑Thu Nov 11, 2021 1:28 pm Another check on my memory that started my impression years ago. The image below shows inflation rates and budget deficits as percentage of GDP for the Carter and Reagan years. There is a "significant" negative correlation such that inflation rates tended to go down as deficits as percentage of GDP went up (r = -0.715638887, p = 0.005).
To me, when you see stuff like that you really need to be willing to question the conventional wisdom of higher deficit spending causing higher inflation. I mean in the context of what happens in the United States.
Now, you are going to get a data pair contributing to the higher deficit associated with higher inflation rate side with this year. But it's not going to be enough to change the overall association. And you're still going to have the three highest annual inflation rates (1979, 1980, 1981) associated with three relatively low deficits as percentages of GDP. And, if you were just looking at it empirically based on what's happened in the past (over my lifetime at least), you would not be looking at higher deficit spending as a probable cause of the increase in inflation. Not if you were just looking at the numbers themselves and looking in the numbers for associations that might indicate causes. Higher deficit spending would not be on the radar.
I looked at a 64 year period and there just isn't even a HINT of association between greater deficit spending and higher inflation rate. It's just not there.