1/ “John Cochrane’s The Fiscal Theory of the Price Level examines the relationship between fiscal policy and inflation, which many consider to be the increase in the price level of a basket of goods and services…

His approach challenges conventional wisdom and presents a compelling case for reevaluating our understanding of the economy…

I highly recommend reading this extensive book, though I have reservations about fiscal policy trumping monetary policy when considering the influence on inflation.”

Here’s why in 🧵. Thoughts?

CC: @AIER @JohnHCochrane 2/ “Cochrane begins by laying out the foundational principles of his theory.

He emphasizes the roles of government debt, taxes, and inflation expectations on prices. He argues that traditional economic models, which focus primarily on the role of central banks in controlling inflation through monetary policy, such as those by Milton Friedman, overlook the substantial effect of fiscal variables on prices.”