Read the story here. Advertise at Before It's News here.
Profile image
By Monetary Sovereignty blog
Contributor profile | More stories
Story Views
Last hour:
Last 24 hours:

Does federal deficit spending cause inflation? The absolute proof.

% of readers think this story is Fact. Add your two cents.

So-called federal “debt” isn’t real debt. It is the net total of all deficits, i.e., the net difference between all federal income and outgo. 

Because, by law, the federal government does not run a negative balance in its basic checking account (The General Account), it offsets the bookkeeping “debt” by accepting deposits into Treasury Security accounts (wrongly termed “borrowing”).

This is nothing more than a technical bookkeeping convention. The government does not actually use those deposits to pay its bills. Instead, it creates new dollars, ad hoc, to pay all creditors.

The T-security deposits remain where they are, safe in their accounts. That is what makes them the safest place to deposit unused dollars.

The fundamental purpose of T-securities: To provide an absolutely safe place to store unused dollars, and this safety adds to the stability and worldwide acceptance of dollars.

If the dollars were used, their safety would be compromised, and the fundamental purpose of T-securities would be lost.

There is a widespread belief that deficit spending causes inflation. No evidence exists for that belief. It simply is an article of faith supported by . . . faith.

Here is a comparison of federal deficits (which total to federal “debt”) vs. inflation.

When the price of oil (green — reflected by supply and demand) goes up, inflation (blue) goes up, and when shortages ease, inflation goes down). Oil prices are the primary drivers of inflation.

The other significant driver of inflation is food, which also is affected by supply and demand:

The price of food (black) closely parallels inflation (blue).

The need for food does not vary significantly. The price of food is affected by supply and production costs. 

The supply of food primarily is caused by weather and disease. Production costs especially relate to oil prices which affect shipping, planting, harvesting, and other manufacturing costs.

Finally, lest someone argue that federal deficit spending causes oil prices to rise, we offer the following graph:

There is no historical relationship between federal deficit spending and oil prices. The highs and lows of each do not correspond.

The resistance to federal deficit spending primarily is based on two false premises:

–That our Monetarily Sovereign government somehow could run short of its own sovereign currency, and

–That federal deficit spending causes inflation

Wrong and wrong.

The real reason for complaints about federal deficits is different: Most deficit spending supports the middle- and lower-income groups (Medicare, Medicaid, Obamacare, and the many anti-poverty initiatives).

The income/wealth/power Gap between the rich and the rest makes the rich rich. The wider the Gap, the richer are the rich. Without the Gap, no one would be rich; we all would be the same.

So the rich, who run America, want to widen the Gap by reducing Medicare, Medicaid, and other deficit spending.

To widen the Gap, the rich spread the disinformation that deficit spending causes inflation. And that mantra has become accepted knowledge by the media, politicians, and economists.

And it simply is wrong.


  1. There is a strong historical relationship between the price of oil (which reflects supply/demand) and inflation
  2. There is a strong historical relationship between food prices (which reflect oil prices, weather, and disease).
  3. There is a strong historical relationship between oil prices and food prices.

May we please, at long last, put to bed the unsupported notion that federal deficit spending causes inflation?

Replace it with a factual basis that inflation is caused by shortages, most often shortages of oil, which lead also to shortages of food and other goods and services.

In the science of economics, let us finally accept fact over intuition.

Rodger Malcolm Mitchell
Monetary Sovereignty

Twitter: @rodgermitchell Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell


The Sole Purpose of Government Is to Improve and Protect the Lives of the People.



Before It’s News® is a community of individuals who report on what’s going on around them, from all around the world.

Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.

"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.

Please Help Support BeforeitsNews by trying our Natural Health Products below!

Order by Phone at 888-809-8385 or online at M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at M - F 9am to 5pm EST

Humic & Fulvic Trace Minerals Complex - Nature's most important supplement! Vivid Dreams again!

HNEX HydroNano EXtracellular Water - Improve immune system health and reduce inflammation.

Ultimate Clinical Potency Curcumin - Natural pain relief, reduce inflammation and so much more.

MitoCopper - Bioavailable Copper destroys pathogens and gives you more energy. (See Blood Video)

Oxy Powder - Natural Colon Cleanser!  Cleans out toxic buildup with oxygen!

Nascent Iodine - Promotes detoxification, mental focus and thyroid health.

Smart Meter Cover -  Reduces Smart Meter radiation by 96%! (See Video).

Report abuse


    Your Comments
    Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

    Load more ...




    Email this story
    Email this story

    If you really want to ban this commenter, please write down the reason:

    If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.