Government spending drives persistent secular inflation
The guest argued that persistent inflation is structurally locked in due to aggressive government deficit spending and policies designed to artificially boost aggregate demand.
The argument
Lacalle stated that central banks and governments are printing money to fund deficits, preventing aggregate demand from naturally cooling during crises. This structural dynamic, combined with the energy crisis, ensures that inflation remains sticky and continues to erode purchasing power globally.
The thesis, stress-tested
✓ What validates it
- ✓CPI shelter and food components continuing to outpace headline CPI
- ✓US 10-year treasury yields breaking above recent highs
▸ Risks discussed
- ▸An unexpected fiscal austerity wave from major economies
- ▸A severe global recession that collapses aggregate demand despite government intervention
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