[kasey_junk]

If you graph economic progress on top of all this isn't it just saying that governments spend more when economic shocks happen?

Other countries are pretty instructive as well. For instance Germany had inflation during a period when they had a budget surplus (for over a decade prior to 2019).

[WalterBright]

Germany was part of the EU, and use Euros for currency. What matters is the deficit of the EU, not Germany in particular.

It's like a deficit in Kansas does not result in inflation in the US, because Kansas does not have its own currency.

    Deficit = Spending - Revenue

[kasey_junk]

You keep saying deficit. Do you mean the trade deficit or the governmental deficit?

[edit later after parent edit] Ok I think you are saying governmental spending deficit. And your link doesn’t go nearly so far as to say that you must account for every governments spending in the EU to account for this.

Do you have any other links? This is a much more expansive view on the relationship between deficits and inflation than I’ve read before.

[Jtsummers]

> isn't it just saying that governments spend more when economic shocks happen?

And that the revenue may be lower. Look at 2008 and 2009. Major increases in unemployment which also resulted in reduced revenue. Which created a double whammy, spending increased because the social safety net did what it was supposed to do (carry people through tougher times) and revenue dropped because there were fewer people paying taxes and many people reduced spending (beyond just those who lost their jobs). Then the deficit drops while the employment rate increases and revenues increases while spending again decreases commensurately.