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It's not a law of nature. There are many hypothetical scenarios where deficit spending does not lead to inflation (usually variations of the theme that deficit

It's not a law of nature. There are many hypothetical scenarios where deficit spending does not lead to inflation (usually variations of the theme that deficit spending's wealth creation outpaces the spending amount and the deficit spending can eventually be scaled back while wealth creation continues). Whether those hypothetical scenarios are realistic and likely to happen is an entirely separate topic, but it's not an ironclad law of nature in the same way that gravity is. It is a much more contingent and circumstantial observation.

WalterBright 5y ago
Your theory is that a free lunch hypothetically exists. It does not, and the belief it does leds to the endemic inflation we have since 1914.
- dwohnitmok 5y ago
  Free lunch is an extremely vague term. What is your exact hypothesis?
  - WalterBright 5y ago
    It means you pay for it one way or another.
    - slg 5y ago
      But the argument wasn't that increasing the money supply doesn't have any negative repercussions. The argument was that increasing the money supply doesn't always result in inflation. Inflation is the "one way" and sometimes we pay with the "another".
      - WalterBright 5y ago
        > The argument was that increasing the money supply doesn't always result in inflation I didn't say it did. Don't omit any of the words I wrote.
        dwohnitmok 5y ago
        > The government cannot deficit spend for free. The cost is inflation Although perhaps you mean by the second portion ", and guess who pays - you and me." that it's not always inflation and can show up in other ways [I don't mean this in a snarky fashion, this is perhaps what you meant?]?
- astrange 5y ago
  Where's Japan's inflation? They actually spent more % GDP than the US did on COVID relief. Note, currently a lot of other countries besides the US are having inflation because of international supply issues. They didn't print money - that suggests we'd also be seeing it if we hadn't printed some. Actually, we definitely would be seeing economic issues if we hadn't rescued everyone, because we'd all be incapacitated due to COVID. That's called successful investment.
  - nathanaldensr 5y ago
    > because we'd all be incapacitated from COVID Source?
    - astrange 5y ago
      Should be “due to” including economic effects. Ask someone in NYC how they liked living through it.
      - nradov 5y ago
        The bad economic effects were mostly caused by drastic, irrational government overreactions to the disease.
        astrange 5y ago
        No, they were caused by people not wanting to go to restaurants or travel when they were constantly hearing ambulance sirens outside their window. Also, if your grandparents are dead or you don't want your children exposed you're still incapacitated (via depression, providing childcare, etc) even if personally safe. Hong Kong is currently providing an example of what happens when you keep society running (via incoming travel bans) so well that nobody bothers getting vaccinated for when it does break through. But since that's omicron, which is a bit milder, they're still doing better than we would've done.
        nradov 5y ago
- cottager2 5y ago
  So you don’t believe that worker productivity can increase? History disagrees. Do you invest your money or do you view that as somehow getting free lunch?
  - missedthecue 5y ago
    You usually pay up in order to receive increased productivity. It's not the result of some human evolutionary advancement. It's capex spending and modern managerial techniques, both of which cost money.
kortilla 5y ago
What is the hypothetical scenario in which deficit spending (creating more money supply) doesn’t lead to more dollars chasing the same goods and services?
- thaumasiotes 5y ago
  The standard scenario would be that the addition of liquidity allows trade to occur when it otherwise wouldn't. The growth in real production can exceed the growth in the money supply. This is generally what we imagine happening with credit cards and other forms of finance.
- SamReidHughes 5y ago
  Simple example: A government goes from spending 1% of GDP to deficit spending 6% of GDP to build an interstate highway network. CPI goes down, because we have _more_ goods and services. Also, with higher interest rates, more people would buy government bonds instead of investing privately. Deficit spending on its own doesn't logically imply inflation or money-printing, or even an inflation pay cut. Wasteful spending does.
  - kortilla 5y ago
    > government goes from spending 1% of GDP to deficit spending 6% of GDP to build an interstate highway network. CPI goes down You talked past the conclusion here.
- trinovantes 5y ago
  Japan didn't experience much if any inflation in the early 2000s QE after the 2007 financial crisis also didn't cause much inflation
  - SamReidHughes 5y ago
    QE made the inflation rate above-zero instead of being negative. Its purpose was to stave off deflation.

WalterBright 5y ago

Your theory is that a free lunch hypothetically exists. It does not, and the belief it does leds to the endemic inflation we have since 1914.

dwohnitmok 5y ago
Free lunch is an extremely vague term. What is your exact hypothesis?
- WalterBright 5y ago
  It means you pay for it one way or another.
  - slg 5y ago
    But the argument wasn't that increasing the money supply doesn't have any negative repercussions. The argument was that increasing the money supply doesn't always result in inflation. Inflation is the "one way" and sometimes we pay with the "another".
    - WalterBright 5y ago
      > The argument was that increasing the money supply doesn't always result in inflation I didn't say it did. Don't omit any of the words I wrote.
      - dwohnitmok 5y ago
        > The government cannot deficit spend for free. The cost is inflation Although perhaps you mean by the second portion ", and guess who pays - you and me." that it's not always inflation and can show up in other ways [I don't mean this in a snarky fashion, this is perhaps what you meant?]?
astrange 5y ago
Where's Japan's inflation? They actually spent more % GDP than the US did on COVID relief. Note, currently a lot of other countries besides the US are having inflation because of international supply issues. They didn't print money - that suggests we'd also be seeing it if we hadn't printed some. Actually, we definitely would be seeing economic issues if we hadn't rescued everyone, because we'd all be incapacitated due to COVID. That's called successful investment.
- nathanaldensr 5y ago
  > because we'd all be incapacitated from COVID Source?
  - astrange 5y ago
    Should be “due to” including economic effects. Ask someone in NYC how they liked living through it.
    - nradov 5y ago
      The bad economic effects were mostly caused by drastic, irrational government overreactions to the disease.
      - astrange 5y ago
        No, they were caused by people not wanting to go to restaurants or travel when they were constantly hearing ambulance sirens outside their window. Also, if your grandparents are dead or you don't want your children exposed you're still incapacitated (via depression, providing childcare, etc) even if personally safe. Hong Kong is currently providing an example of what happens when you keep society running (via incoming travel bans) so well that nobody bothers getting vaccinated for when it does break through. But since that's omicron, which is a bit milder, they're still doing better than we would've done.
        nradov 5y ago
cottager2 5y ago
So you don’t believe that worker productivity can increase? History disagrees. Do you invest your money or do you view that as somehow getting free lunch?
- missedthecue 5y ago
  You usually pay up in order to receive increased productivity. It's not the result of some human evolutionary advancement. It's capex spending and modern managerial techniques, both of which cost money.

kortilla 5y ago

What is the hypothetical scenario in which deficit spending (creating more money supply) doesn’t lead to more dollars chasing the same goods and services?

thaumasiotes 5y ago
The standard scenario would be that the addition of liquidity allows trade to occur when it otherwise wouldn't. The growth in real production can exceed the growth in the money supply. This is generally what we imagine happening with credit cards and other forms of finance.
SamReidHughes 5y ago
Simple example: A government goes from spending 1% of GDP to deficit spending 6% of GDP to build an interstate highway network. CPI goes down, because we have _more_ goods and services. Also, with higher interest rates, more people would buy government bonds instead of investing privately. Deficit spending on its own doesn't logically imply inflation or money-printing, or even an inflation pay cut. Wasteful spending does.
- kortilla 5y ago
  > government goes from spending 1% of GDP to deficit spending 6% of GDP to build an interstate highway network. CPI goes down You talked past the conclusion here.
trinovantes 5y ago
Japan didn't experience much if any inflation in the early 2000s QE after the 2007 financial crisis also didn't cause much inflation
- SamReidHughes 5y ago
  QE made the inflation rate above-zero instead of being negative. Its purpose was to stave off deflation.