From Calafia Beach Pundit, Inflation is So Over:
Charts #6 and #7 are the most important charts that hardly anyone is looking at these days. What they show is that our recent surge in inflation was caused by a surge in deficit spending from 2020 through 2021. As much as $6 trillion of Covid “emergency” spending was effectively monetized, as it accumulated in the nation’s savings and deposit accounts (M2). Once people started to spend the money, beginning in early 2022, inflation took off. A ton of extra money was printed, and about a year later, inflation started to rise. Now that the extra money is disappearing, inflation is slowing significantly.The best news here is that the third round of deficit spending that began last summer, and has now pushed the 12-month deficit from $1 trillion to almost $2 trillion, has not been monetized at all. This all but ensures that inflation is on its way out. The fires of inflation have been extinguished; only embers remain, and they are already flickering out.
If the deficits are not monetized then they are added to the debt. While this does not add to the current inflation pressures, at what point and how will this affect our monetary balance? Inflation historically has been a seductive solution to excess debt.