The economics discussion would have a great deal more clarity if it were broadly understood that underlying all lending and borrowing is the movement of actual goods and services. Lenders are forfeiting near-term access to goods and services to borrowers who need near-term access, but only based on the expectation of access to goods and services in greater amounts (the interest rate for money loaned) at a later date.
This truth came to mind while reading a recent co-authored opinion piece by the Hoover Institution’s John Cochrane and Stanford Ph.D candidate Jon Hartley. They write that “debt and deficits do not automatically cause inflation,” which is of course true. Truer would be for them to write that debt and deficits have nothing to do with inflation. Inflation is currency devaluation, which is a policy choice.
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