Another little thought experiment – – and I welcome corrections or new insights on this.
The Fed has made it clear they want inflation. They want it at 2% or above, and they’re willing to let it go decently above that level for a while before they consider raising rates. They’ve said so repeatedly.
At the same time, trillions and trillions of new dollars are floating around out there. Adjunct to this, the world has never been so in debt. It hasn’t stung too much, because interest rates are so historically low that the burden of interest rate expense today isn’t much different in nominal terms than it was twenty years ago, even though we are dramatically deeper in debt. So the government is a bit spoiled by near-zero rates.
