Previous posts have summarized the correlations for U.S. federal government deficit spending with inflation1 and deflation2 over the years from 1914-2022. In this article, the correlations of deficit spending with inflation are determined for the years not part of significant inflation surges (up or down).
From a photo by Haran Amorim on Unsplash
This is the second of two posts to analyze the eleven significant deflationary periods for the years 1914-2022. The first post was Part 14A.1
From image by Nicolae Baltatescu from Pixabay
Last week we thought we had wrapped up, for now, our work on timeline shift effects on the correlation between US federal government deficit spending and consumer inflation. However, more ideas have occurred, and this week we will look at further details regarding which comes first, inflation or increased government spending.
Credit: Photo by Grace O’Driscoll on Unsplash
re “Inflation is always and everywhere a monetary phenomenon.”
. – – Milton Friedman1
Note: An updated, expanded, and further edited version has been published here.
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, 1989. Credit: Encyclopedia Britannica.