I was.
Reduction of commercial credit is not enough to offset deficit spending by the Federal Government and the resulting Treasury bond issues. A slowdown in Government bond issues is what puts the final end to inflation. That happens well after the commercial sector gets devastated.
And if the Government keeps expanding bonded indebtedness, inflation does not end at all.
Governments have piled up massive debts that cannot and will not be repaid. Those debts will be written off, either by inflation or default and repudiation.
Higher interest rates will destroy municipal and state governments. They will show waves of "unexpected" defaults on bonds and pensions. The Federal Government can simply "print more money" through bond issues to cover payments. Federal checks will always clear. The money will not buy very much.
But the bankers will protect themselves no matter what, and they will do so at the expense of everybody else.
“Governments have piled up massive debts that cannot and will not be repaid. “
It isn’t intended to be paid off and doesn’t need to be.
It is a Funded Public Debt as was first set up by Alexander Hamilton in the Funding Act of 1790.
Alexander Hamilton converted what had been an ‘overwhelming’ debt inherited from the Continental Congress and the Colonies, into an asset desired by investors. All that investors care about is that interest be paid on time. All that Congress and the Treasury needs to pay attention to is the debt coverage as a percentage of revenues.
“And if the Government keeps expanding bonded indebtedness, inflation does not end at all. “
We had a real world test proving that that simply isn’t so. Inflation collapsed during Reagan’s admin without ending deficits and while Treasury debt was increasing. Inflation was killed by freeing restraints on the economy through deregulation and tax relief along with the Fed restraining growth of the money supply. The three legs of Reaganomics as described by Martin Anderson, one of its principle designers. This allowed the production possibility frontier to shift to the right, permitting economic expansion without inflation.