The idea that Fed purchases of treasury bonds are specifically "enabling the federal government to live beyond its means" is a total fallacy. You of course could imagine a situation in which fiscal and monetary authorities teamed up to finance otherwise unworkable public expenditures, but what you would have in that situation would be inflation. If anything what's happening today is the reverse of what Cato is suggesting.
Off equilibium spending by the Fed/Congress causes inflation?
I would think it causes low growth and mostly deflation. Am I right?
Inflation is mostly in the eye of the index maker, and the Fed uses something close to the household purchases inflation, that is the retail end of trade. Good index to pick. Take a look, Mr. Yglesias, I bet you that index, CPI Y over Y, has been going down as government increases debt, as has the one year rate, as had real growth; over a thirty year period.
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| Long term consumer inflation down |
The inflation Mr. Yglesias is looking for is in the SP500 inflation index, and it is hyperinflating.
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