Inflation in the shadow of debt: growth, regulations, and reforms

Interviewer: Today I'm interviewing John Cochrane, the Rose-Marie and Jack Anderson Senior Fellow at the Hoover Institution, Senior Fellow at Stanford University Institute for Economic Policy Research, and Professor by courtesy and respectively Finance and Economics at Stanford University. We're discussing his article of 17th of September 2021 in Project Syndicate, "Inflation in the Shadow of Debt". Listeners are expected to have read the article before listening to the interview. John, thank you for sparing the time for this interview. May I start by clarifying what you mean by microeconomic reform? I interpreted it to mean regulatory reform, a term you used later in the article. Is that correct? Dr. Cochrane: Short version, yes. The slightly longer version, to review the major thesis of the article is that we are having inflation now primarily because the government, in the US especially, borrowed a lot of money, printed up a lot of money and sent it to people with checks. The people are now spending those checks and that causes inflation. Later, when we want to slow down inflation, what does it take? It takes improving the supply side of the economy, for two reasons. One, so that the supply side of the economy can produce all the stuff people want to buy without prices going up, but also because the government needs tax revenue to pay back all this debt rather than inflate away all this debt. Tax revenue comes not just from higher tax rates,