[FLT-bird]

Government gets the money to spend either from raising taxes (thus taking money that would otherwise be going to the private sector) or by issuing debt. Where does it get the money to issue new debts? Oh, well you see the Treasury just creates it out of thin air. Thus there is YET MORE money chasing the same amount of goods in the economy. The result is inflation.

[9YearLurker]

Even worse, the Fed “creates” the money to buy that government debt—and enrich the banks, and...

[FreshPrince]

>>Oh, well you see the Treasury just creates it out of thin air.

Not sure about that. The Treasury creates a promissory note. Investors BUY those notes. So there is a transfer of wealth. Not a creation out of thin air. I think the biggest buyer is Social Security. (Im not saying money isnt created out of thin air by other means BTW) Most money that is created out of thin air is when the Fed lends money it creates out of thin are to the banks.

[nathanbedford]

"Government gets the money to spend either from raising taxes (thus taking money that would otherwise be going to the private sector) or by issuing debt." Good point.

With respect to the money spent by government which it does not borrow but raises in taxes, the effect is normally deflationary. because: It does not make sense to take the job of capital allocation away from people who have demonstrated great skill in capital allocation, and give it to an entity that has demonstrated very poor skill in capital allocation, which is the government

Economist described this as "opportunity cost" that occurs when capital is misallocated. Government officials, whether elected or appointed, are not in the business of allocating capital to increase return but to increase vote tallies or turf.

Beware the politician that wants to make "investments" and the regulator who wants to enforce "protection."

With respect to government spending done by borrowing rather than taxing, the effect is inflation but the impact or recognition of that inflation may be delayed thus affording the politician opportunity to play Santa Claus and escape the consequences, at least for a season.

Heretofore inflation in America has been under control (at least by modern rather than traditional standards of reckoning) because America has been the world's largest economy, the world's reserve currency, a superpower, energy rich, internally stable, under the rule of law, with open markets and growing. One need not review every element to immediately react and say, Biden has impaired everyone of these vital elements! Anyway, by 1970s standard of reckoning in real dollars, our present rate of inflation is approximately 17%!

Our ability to further consequences of profligate borrowing is ending and America is about to enter an era of pain.