[quote=ocrenter]there is no doubt that the government is planning and hoping for inflation.
the citizens would prefer it over additional collapse in their home value.
inflation is preferred over deflation.
but the most important thing:
inflation makes the debt less burdensome. and globally we are still in the position to inflate our way out of certain doom.[/quote]
I think you are right that at a micro foundational level, democratic republics are inclined to inflate.
If enough people want it, then their interests will get expressed.
However, the issue here is bit more complex.
Specifically, inflation is generally driven primarily from increased nominal effective demand.
That demand is composed of 2 primary components.
Those are desire (wanting the thing) and capacity (the ability to afford it).
Desire is influenced by capacity because, of course, having money does tend to dictate a certain new interests (money no object, wouldn’t you want a corvette as a commuter car?).
The trick is the capacity.
We don’t (so far as I know) have a truly good metric for capacity.
It used to be that M1 or M2 gave a pretty good indicator.
However, with the advent of innovative consumer leverage (mostly since 1980), I don’t think those measures really work so well.
I think that credit cards, auto loans, mortgage standards, and unsecured lending have a pretty huge effect.
The effective demand for that debt, in turn, has also dropped dramatically.
This is mostly due to higher lending standards and generally decreased sentimental tendency.
That sentiment issue is driven because there is a perceived lack of safety in those lending products.
HELOCS and card shutoffs as well as a general fear of bankruptcy (probably a good fear to have) are the bases of that perception.
In other words, demand is down due to general capacity drop and the demand for increase capacity is down and showing no signs of real change.
Dumping money into banks (thus raising monetary base) can’t really change aggregate demand by itself. If we see inflation, it will be one of 2 distinct animals:
1: as part of the cost-push (reference by CAR above) with commodity and exchange prices pushing us into greater brokeness
or
2: as part of an intentional effort to reduce effective debt burdens
Honestly, I think that the second strategy is more likely in Eurozone. There they have the unenviable role of issuing and managing debt without owning their own printing presses.
I would not be surprised to see the ECB lose relevance over this.
