Overstimulation Risk
New respect for Keynesian economic theory. Practically everyone in power now agrees that deficit spending produces GDP growth. They differ only on its expected magnitude and duration. The few exceptions are mostly outside the halls of power.
The experts I trust are split on this question, and of course no one really knows. But the debate is important philosophically.
Nothing underscores this more than the comment from my personal economic bête noire, Modern Monetary Theory exponent Dr. Stephanie Kelton. Asked whether she was worried about the stimulus bill causing inflation, she said:
"Do I think the proposed $1.9 trillion puts us at risk of demand-pull inflation? No. But at least we are centering inflation risk and not talking about running out of money. The terms of the debate have shifted."
Fed Chair Jerome Powell: We Need More Stimulus and Inflation Is Not a Worry
Others share Summers’ concern and add more to the list. Former New York Fed President Bill Dudley wrote a Bloomberg column back in December titled Five Reasons to Worry About Faster US Inflation.
John Mauldin 12 February 2021
https://www.mauldineconomics.com/frontlinethoughts/overstimulation-risk/
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