Delete comment from: Captain Capitalism
@FSK
I believe it would be a mixture of both.
Deficit spending creates the illusion of a higher production base, and is often financed 'invisibly' through loans from the Chinese, for instance.
So on the one hand, we have a bubble, artificially inflating wages and profits for the time being. People wind up spending beyond their means without realizing it.
Meanwhile, inflated dollars are sitting off shore shomewhere, like a cyst that's about to burst.
Both create a time delay between the money spent, and the inevitable inflation. Now granted, when you do this consistently over 50 years that time delay will average out (leading to the boom and bust 'business' cycle), but that's assuming the rate of deficit spending remains consistent.
When you have a massive increase, as we've seen in Canada and the US recently, then you're looking at a time bomb waiting to explode.
It won't take decades to kick in... but it won't happen immediately, either.
May 2, 2012, 11:38:54 PM