One of my biggest frustrations over the past 15 years has been the economics profession’s drift away from certain well established propositions, such as the fact that the Fed controls the price level. But there are signs of light. David Beckworth has a twitter thread discussing how inflation has recently fallen sharply despite absurdly large budget deficits as far as the eye can see:
Ironically, our biggest inflation episode (1966-81) occurred during a period of relatively small budget deficits. The gross federal debt ratio fell from 40% of GDP in 1966 to 31% of GDP in 1981. Today, it’s over 120% of GDP and likely to rise much higher.
Read Beckworth’s entire thread.