Will the rapid rise in the budget deficit and the Fed-led expansion of the US’s monetary base lead to devastating inflation? Is it time to reign in the stimulus? Krugman:
What about the claim that the Fed is risking inflation? It isn’t. Mr. Laffer seems panicked by a rapid rise in the monetary base, the sum of currency in circulation and the reserves of banks. But a rising monetary base isn’t inflationary when you’re in a liquidity trap. America’s monetary base doubled between 1929 and 1939; prices fell 19 percent. Japan’s monetary base rose 85 percent between 1997 and 2003; deflation continued apace.
That is as much as I feel I need to read on the subject.
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