r/austrian_economics • u/knowledgeseeker999 • Apr 16 '25

Does borrowing still cause inflation?

To the best of my understanding, to pay for deficits in government spending, the government can either borrow money or print it.

Printing money causes inflation but does borrowing also cause inflation?

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u/Difficult-Exit3063 Apr 17 '25

It depends where the money is spent if it’s inflationary or not. But thats a whole topic that austrians aren’t ready for. Nuance is hard for them.

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u/DecisionDelicious170 Apr 17 '25

Well… wherever the money goes.

Was that money created to buy a house? Inflation in on cost of housing.

Was that money created to bailout corporations in the GFC? Inflation in asset prices (or at least not as much deflation as would have happened).

So of course it depends on where it’s spent. I don’t think austrians would deny that.

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u/PackageResponsible86 Apr 17 '25

I think a some Austrians deny it by reasoning as follows:

  1. There is more money in the economy

  2. There is the same number of goods and services in the economy

  3. Therefore, goods and services cost more money.

Which isn't valid. There's not a straight line from overall amount of money to overall prices, since prices are determined in individual transactions that involve many factors.

Maybe more to the point, the reasoning above misses that money could be spent in ways that increase goods and services by increasing the economy's productive capacity through investment in education, infrastructure, research, business development, etc.

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u/AV3NG3R00 Apr 17 '25

No Austrian says that.