Beyond the obvious: When the state drives up prices
Inflation is not just a monetary policy problem, but primarily a fiscal one - a look back, three years after John Cochrane's "Fiscal Theory of the Price Level".
Stanford economist Prof. Dr. John Cochrane's theory, "The Fiscal Theory of the Price Level," suggests that state debts become inflationary when the population doubts the state's ability or willingness to meet its future obligations. This theory appears to be supported by current developments, with increasing doubts about western countries' ability to fulfill their promises to aging societies posing significant risks to the value of money.
Three years ago, Cochrane discussed the US debt ceiling crisis, which has now reached $31.4 trillion, and predicted several scenarios that seem to be unfolding. A recent podcast episode features a combination of Cochrane's previous interview and current analysis from Daniel Stelter. Cochrane's book, "The Fiscal Theory of the Price Level," was published in January 2023.
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