> (Your cite makes no mention of 2008/2009.)
Incorrect: "One may look to politicians’ statements. Even in the Obama-era “stimulus” spending, the administration emphasized promises of eventual debt reduction. " And I have more to say on it later.
My cite is from a world-class economist, not from some random person on the Internet.
> One one hand, we have thousands of years of history with what causes inflation.
> On the other hand, we have one instance.
Again, you are assuming facts not in evidence, you assume your version of reality is correct, likely because that is what economics text books taught you, because they also assumed it to be the case, these assumptions do not make it true.
Perhaps those thousands of years of history actually agree with my version also. We don't know what people were thinking across those thousands of years of inflation history, it's possible they were thinking our governments(such as they were) were not trusted to pay it back, as generally speaking, governments that go on large spending sprees tend to not pay it back very well. It's hard to be disciplined with money when there is very little incentive to politicians while in office.
There is no rigorous proof of what causes inflation. There are many well-educated guesses and your perspective was the common wisdom for a long time. That doesn't make it true, no matter how much you want it to be.
I'm pretty sure my version is also wrong, but it's at least an interesting perspective rather than "money printers go brrr inflation then always happens".
> Recall my other post here about how making loans creates money, and paying the loans back destroys it.
I don't agree with the second part of this sentence. I completely agree that the banks create money out of thin air when they decide to loan you $100k. But if you pay it back, more money is created as part of the interest payments on that $100k. If you don't pay it back:
> Bankruptcy destroys money.
True.
> I wonder if all the bankruptcies, defaults, haircuts and writedowns removed a vast amount of money from circulation, and the deficit spending simply filled that hole rather than creating more inflation.
The US government made money on it[0]. I'm almost positive there is essentially a zero percent chance of making any of the trillions we spent in 2020 back. We have to pay all that borrowing off somehow, either we raise taxes or we inflate it away. It seems like we are on the inflation train version for now at least.
Though perhaps your comment is also partially true, there was some bankruptcies(one might argue not enough). A quick web search didn't turn up any good data on the amount(s) though and I'm to lazy to do more research on it, but if you have done some, I'd be interested.
0: https://money.usnews.com/investing/articles/2017-01-19/finan...