Chapter 1: Fiscal Policy and Inflation with John Cochrane | LFHSPBC

Chapter One: The Fiscal vs. Monetary Theory of Inflation
John Cochrane explains that the economic phenomenon of inflation concerns not relative price increases but rather an increase in all prices and wages. Cochrane then demonstrates how the government’s response to the COVID pandemic has caused the current 40-year highs of inflation. Finally, Cochrane shows how the fiscal and monetary theories explain inflation and where they differ.
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Click below to watch the other videos in this series.
Chapter 1: • Chapter 1: Fiscal Poli...
Chapter 2: • Chapter 2: Fiscal Poli...
Chapter 3: • Chapter 3: Fiscal Poli...
Additional resources:
Read “Fiscal Histories,” by John Cochrane. Available here. static1.squarespace.com/stati....
Listen to “What ‘Is’ Is: John Cochrane on Recessions, Inflation, the Fed, Debt and ‘Green Pork,’” with Bill Whalen and John Cochrane. Available here. www.hoover.org/research/matte....
Read “Inflation and Monetary Policy,” via Policy Insights by PolicyEd. Available here. www.policyed.org/policy-insig....
Read “The ‘Shrink the Economy’ Act,” by David Henderson. Available here. www.hoover.org/research/shrin....
Read “It’s Time to Get Back to Rules-Based Monetary Policy,” by John Taylor. Available here. www.hoover.org/research/its-t....
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[@dankurth4232]

The fiscal theory is the more comprehensive, the monetary theory the more narrowly focused (or invariant) one.
Yet the monetary theory loses its effective applicability, when the social, political, economical and financial framework becomes increasingly dysfunctional by an unsustainable government debt level.
This can be illustrated by the example of a Central Bank of a country with vastly excessive debt, if ever this Central Bank would be confronted with high inflation they simply couldn’t increase interest rates effectively, because they then would destroy the economy and with very high probability the political order of this country.
This is unfortunately not an abstract example, but might (hopefully not) become very visible in case the Bank of Japan should be ‚forced‘ to increase interest rates after decades of yield curve control and due to that having accumulated Japanese Government Bonds equivalent to more than 200 % of GDP.
In that case the instruments of Monetary Theory would still be effectively applicable but only at the cost of the destruction of the country.
One could a bit sarcastically summarize: MMT (Modern Monetary Theory) shows the limits of the applicability of Monetary Theory

[@dimitrirazine]

Part 1:
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Part 2:
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Part 3:
ua-cam.com/video/VyiCIBILhRM/v-deo.html

[@joshuap9580]

the bank holds your debt because housing prices have gone up and up and up. you dont pay, they get the house.

[@tripplebarrelfinn4380]

If you owe a bank a million dollars, it's your problem. If you owe a bank a billion dollars, it is their problem.