Large deficits don't cause inflation: Fed's Yellen

[Bob111]

Deficits don't cause inflation, she said. Instead, the worry is that they might cause interest rates to rise.

But once private spending recovers, the competition for funds between the government and private sectors could drive interest rates up," Yellen said in a speech to bankers in Idaho.

http://www.marketwatch.com/story/la...e-inflation-feds-yellen-2009-07-28?siteid=rss

 

[Div_Arb]

Oh, well that solves everything..

 

[morganist]

Quote from Bob111:



http://www.marketwatch.com/story/la...e-inflation-feds-yellen-2009-07-28?siteid=rss

this is the problem there is so much debt that if the interest rate rises it will cause economic meltdowns. so it is a lose lose situation.

 

[Arnie]

Well, thank you Ms Yellen for stating the obvious.

If you look back in history, it's clear that deficits and inflation have little correlation. But, I would think all this "stimulus" will be inflationary down the road, though. Considerng the amount of stimulus we are seeing, if we don't get inflation that will be a clear sign the stimulus is not working. What then?

Deflation.

 

[IanMacQuaide]

Inflation vs Deflation?
I guess we'll find out in 2 yrs, or less.

 

[Daal]

Quote from Arnie:


If you look back in history, it's clear that deficits and inflation have little correlation.

I'm not sure thats clear at all. If you look back at government spending it does correlate to CPI. One of the few people who claims deficits fuel inflation and whose opinion is worth something is John Hussman, hes got a chart in his website. I'm yet to fully understand his theory but the correlation does exist

 

[Ivanovich]

Another reason to be afraid - this is the bimbo that could very well take Ben's place if he isn't reappointed.

 

[Arnie]

Quote from Daal:

I'm not sure thats clear at all. If you look back at government spending it does correlate to CPI. One of the few people who claims deficits fuel inflation and whose opinion is worth something is John Hussman, hes got a chart in his website. I'm yet to fully understand his theory but the correlation does exist

Spending? Yes. Deficits? Not so clear to me. The question was about deficits.