Spend less or tax more: it’s Jim Chalmers’ call, say experts. By Thomas Henry in The Australian.

“Many countries (are running) very large government deficits, and there are no particular signs that these are coming down,” [RBA governor Michele Bullock] said during a fireside chat in Sydney

“This is adding to financing ­issues for governments. And if the economy is growing more slowly than the interest rate they are being charged, then that is just going to keep widening over time. So that’s the challenge.” …

KPMG chief economist Brendan Rynne warned decades of budget deficits would become incredibly politically damaging for any government as households ultimately picked up the bill for higher government debt.

Politicians always choose the inflationary route rather than keeping the money supply near constant because it is not as obvious that they are to blame for inflation (because of the one or two year lag between their overspending and the ensuing inflation, and because the media has thoroughly confused most people about inflation).

The one exception was in 1930, where the US Fed choose to rein in the money supply in response to the debt/banking crisis — and the Great Depression followed. Central bankers have since made it very clear they will never do that again. The response now is always to print instead, to accommodate whatever spending the politicians feel is necessary.

All this tough talk about raising interest rates is a bluff. Eventually the central banks will collapse and give way to the inflation. Caught between a rock and a hard place, doing an impossible job.