No evidence that US federal deficits caused inflation in the last 60 years.
Saturday, February 6, 2021 at 01:26PM Now that the Dems control Congress and want to spend big to save lives and the real economy, the inflation worriers are back. So, what is the evidence that federal deficits cause inflation? If there is a strong causal relationship, it should show up in the following graph. See it? I don't. What if you mentally lag the inflation rate increase a year, or two or three, behind a deficit increase? Can you see the correlation then? Me neither.
From 1966 to 1980 was a very inflationary period, but the federal budget was essentially balanced throughout that period. After that, there were deficit spikes in 2002, 2009, and 2020, but there was no increase in inflation. Instead there were simultaneous decreases in inflation, the opposite of what is orthodoxically predicted. Why do we pay any attention to such theoretical predictions of causation when there is not even any correlation in the real world?
