The stimulus should not by itself create inflation. However, there is a decent probability that a good bit of the stimulus will be paid for by T-Bills bought by the federal reserve, and the federal reserve will effectively “print” the money to buy those bills. (As opposed to using money already in general circulation) This printing of money is what people see causing inflation, or even potentially hyper-inflation.
Others argue that the fed has some fundamental flaws in it’s economic theory that it bases policy on and can’t or won’t create enough new money to stop deflation. This argument is best laid out by Steve Keen at debtdeflation.com
If you haven’t read these articles, I highly recommend them. Admittedly they are both long, and particularly Steve Keen’s will take some thinking to absorb. But this should shed a good bit of light on where we might be going.
