One of the key criticisms against the federal government and its latest budget is the level of spending and the growing debt.
Financial advisory Larry Short of Short Financial, a branch of IA Private Wealth, says spending itself doesn’t have an immediate impact on inflation, but it could have an impact in the longer term.
“During the first eight months of COVID,” says Short, “the federal government spent $240 billion…so that’s where you get a real jump in the inflation.”
Short says the federal government appears to be adopting Modern Monetary Theory in its fiscal approach.
According to Modern Monetary Theory, growing the deficit at a slower rate than economic growth, “you can borrow forever” whereas ‘small C’ conservatives consider MMT “the magic money tree” which is you never have to pay down the deficit until something happens.”