Reply #43: So we are in agreement that..

[girl gone mad]

inflation is the only financial constraint to government spending. This is why we can't run up endless debts or spend endless amounts of money.

Inflation happens when you have too many dollars chasing too few goods. "Printing" money to pay off debts would not involve the creation of any new money, just trading one type of money for another.

We're in a deflationary environment because the private sector ran up too much debt and leverage over the last 30 years to maintain a decent standard of living in the wake of shrinking wages and corporate offshoring. As long as the private sector continues to net save (run a surplus), the public sector must net spend (run a deficit) or the economy shrinks. We can always produce sufficient goods and commodities of value.

The only certain things in life are death and taxes. Fiat currency derives its value from the governments ability to tax, not from faith or credit.

Krugman is a Keynesian. I'm a Minskyian.