Government Spending and Inflation. Part 10

Previous work has shown that the correlation between US federal government deficit spending and CPI inflation fluctuates widely and wildly over time.  Results vary depending on data sample selection.  That leads to the present decision to look specifically at each instance of inflation, disinflation, and deflation.


Credit:  From a photo by Sam on Unsplash

Government Spending and Inflation. Part 6

Note: This was posted at 4:24 pm on March 26 with some incomplete sections.  Updating in was completed at 2:52 am March 28.

In previous parts of this discussion, we have made some qualitative observations about relationships involving the correlations between U.S. federal government spending and inflation in the U.S. economy. For the first time in this series, we will move into the arena of quantitative measurements of government spending and inflation correlations.


Credit:  Photo by Mahdi Soheili on Unsplash

Government Spending and Inflation. Part 1, Expanded

“Inflation is always and everywhere a monetary phenomenon.”
.    – – Milton Friedman1

Nobel laureate Milton Friedman is considered to be the father of monetarism. This macroeconomic theory enjoyed popularity in the late 20th century but has come under increased criticism in the 21st century.  Monetary theory is deeply linked to arguments about the causes of inflation.  As shown here, there is little data to support Friedman’s theory that government spending generally causes inflation.  The issue is not as simple as he made it seem.


Milton Friedman, age 77, 1989.  Credit: Encyclopedia Britannica.