The discussion about inflation is tied into a mind - set that high government
debt leads to inflation and is therefore bad.
Not exact matches
A related question I sometimes hear — which bears also on the relationship between monetary and fiscal policy, is this: By buying securities, are you «monetizing the
debt» — printing money for the government
to use — and will that inevitably
lead to higher
inflation?
In the Doug Purvis Memorial Lecture, Governor Stephen S. Poloz shows how changing the mix of monetary and fiscal policies can yield the same outcomes for growth and
inflation, but
lead to different results for public sector and private sector
debt levels, which can impact financial stability.
It also
lead to higher
inflation, which reduced the real value of Iceland's
debts, making them easier
to repay.
The monetary stimulus, known as quantitative easing, means that the Fed is monetizing US government
debt, which critics contend could
lead to future
inflation and asset bubbles.
The bottom line: Given the significant levels of
debt that remain on household and government balance sheets,
inflation is likely
to remain lower than what we experienced in periods
leading up
to the financial crisis.
Instead of breakthrough that would
lead to overcoming the global economic crisis, the scenario of the global economic collapse was predicted by the great thinker and French economist Jacques Attali (2010) who predicts the occurrence of four steps
to the unfolding economic crisis that erupted in 2008 in United States and that spilled over the world: 1) the public
debts become heavier; 2) the failure of the euro and the global depression; 3) the failure of the Dollar and the return of global
inflation; and, 4) the depression and ruin of Asia.
Their policies, combined with an unfavorable international economy
led to a major decline in the Jamaican economy with high levels of unemployment,
inflation and
debt, and a significant escalation of violence as supporters of the JLP and PNP engaged in bloody struggles.
President Obama's administration is pushing
to raise the nation's
debt limit an additional $ 2 trillion, which currently stands at $ 14.3 trillion and issued dire warnings from business leaders that failing
to OK the increase will
lead to inflation, an immediate doubling of «Interest Rates» and a killer «Wall Street Crash» — House Speaker John Boehner, R - Ohio, says the GOP will demand trillions in spending cuts before considering an increase in the
debt ceiling.
But aside from monetizing
debt, which often
leads to serious
inflation, QE has not shown much potency
to do anything good.
Unemployment,
inflation, and mortgage repayments are soaring as a result of the crash, which has saddled Iceland with levels of
debt running
to tens of thousands for each of the population of 320,000 and necessitating a 10bn - dollar bailout programme
led by the International Monetary Fund.
According
to a recent Globe and Mail article which references Statistics Canada numbers, «the total amount of
debt held in households
led by people aged 55
to 64 almost quadrupled between 1999 and 2012, while the level for the overall population did little more than double (these are
inflation - adjusted numbers).
As discussed last month, this is a bit of a too much of a good thing crash all around — tax cuts into a strong economy sending
inflation and interest rates high enough
to lead the Federal Reserve
to (potentially) over react and raise rates too high, causing a recession and growing
debt issues as the government refinances
debt at higher rates, all while a tax cut reduces federal revenues.