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It is the result of the government creating money to fund the deficit. How does the inflation tell the difference between money created to fund the deficit and

• WalterBright 3y ago
  Great question. When banks loan money, they create the money. But when the loan is paid back, the money is destroyed. The federal deficit is not paid back. (Oh, there's the fiction of it being paid back, but what actually happens is the government just issues more debt.)
  • maxerickson 3y ago
    But sometimes it takes much more than 13 months for the money to be destroyed. How does the inflation know the difference in those cases?
    • WalterBright 3y ago
      It all averages out among all the banks issuing loans and resolving them.
      • maxerickson 3y ago
        Household debt has gone up by trillions of dollars. https://www.newyorkfed.org/microeconomics/hhdc https://www.newyorkfed.org/microeconomics/hhdc
  • triceratops 3y ago
    > The federal deficit is not paid back You mean the federal debt. The federal deficit is funded by the federal debt. [1] If the federal debt were fully paid back, would any money be destroyed? Wouldn't it just go from taxpayers to bond holders? 1. https://fiscaldata.treasury.gov/americas-finance-guide/national-deficit/#the-difference-between-the-national-deficit-and-the-national-debt https://fiscaldata.treasury.gov/americas-finance-guide/natio...