Referral program
Counter-Intuitive Inflation – How Overspending Creates Inflation

This is an excerpt from Counter-Intuitive Inflation. We’ll be posting sections over the first two weeks of October.

How Overspending Creates Inflation:

Right now, the US Congress is running a $2 trillion annual deficit. That’s the on-balance sheet number, and the one we see associated with the $33 trillion national debt. When you include off-balance sheet liabilities for programs like Social Security and Medicare, the actual annual deficit is closer to $8 trillion. What happens next is that between Congress, the Treasury, and the Federal Reserve, more debt is issued which effectively increases the supply of dollars. Very little of this spending results in the creation of valuable long-term infrastructure. Instead, it’s simply future consumption demand pulled forward.

This means that we have trillions of additional dollars chasing the same amount of goods. To make things worse, government programs often have the effect of incentivizing unproductive behavior meaning we end up with more dollars potentially chasing fewer goods. The result is inflation expressed as higher prices.

The original definition of inflation was an increase in the money supply. That definition has shifted over the years to mean an increase in prices. Either way, increasing the money supply leads to higher prices. So, while the definitions aren’t exactly the same, they are linked.

This kind of increase in the money supply was always going to lead to higher prices.


Information contained in this report is believed by Deep Knowledge Investing (“DKI”) to be accurate and/or derived from sources which it believes to be reliable; however, such information is presented without warranty of any kind, whether express or implied and DKI makes no representation as to the completeness, timeliness or accuracy of the information contained therein or with regard to the results to be obtained from its use.  The provision of the information contained in the Services shall not be deemed to obligate DKI to provide updated or similar information in the future except to the extent it may be required to do so. 


The information we provide is publicly available; our reports are neither an offer nor a solicitation to buy or sell securities. All expressions of opinion are precisely that and are subject to change. DKI, affiliates of DKI or its principal or others associated with DKI may have, take or sell positions in securities of companies about which we write. 


Our opinions are not advice that investment in a company’s securities is suitable for any particular investor. Each investor should consult with and rely on his or its own investigation, due diligence and the recommendations of investment professionals whom the investor has engaged for that purpose. 


In no event shall DKI be liable for any costs, liabilities, losses, expenses (including, but not limited to, attorneys’ fees), damages of any kind, including direct, indirect, punitive, incidental, special or consequential damages, or for any trading losses arising from or attributable to the use of this report. 

Leave a Comment

Recent Blogs

Invite & Earn

Signup to start sharing your link
background banner image
loading gif

Available Coupon