This may or may not happen

The Financial Times tells us - well, the FT quotes someone as saying that - inflation might be a’comin’:

US faces inflation threat as money supply rockets

This is one of those things that may or may not happen - after all we’ve all been trying to create inflation this past decade and some countries have been more successful than others.

It is true though that M0, 1 and 2 are wildly expanded as a result of QE and Ms 3 and 4 not so much. If those latter two respond - or return to responding - as theory predicts they should to the first three then there is indeed a massive bolus of inflation in the system. They might, of course, not do so given that they haven’t in these recent years - this is just part of the economic circumstance in which we find ourselves.

All of which is going to be most interesting as it will test this Modern Monetary Theory to destruction. If massive money printing does lead to that inflation then there are only two solutions. One is to reverse QE - thus massive money printing isn’t something possible to continue. The other is to raise taxes which rather obviates the point of MMT itself. For it would mean a return to that dualism of high spending meaning, by necessity, high taxes. There is no free lunch that is.

What fun that an economic theory gains this real world test so soon after its formulation. The advantage being that we’ll be able to put it back to bed pretty soon - for we are really pretty certain that inflation is out there. Other episodes of the same thing by a different name - monetisation of fiscal policy - have tended to work out that way from Diocletian onwards.