The Fiscal Theory Of The Price Level, John Cochrane and the Dallas Fed. The Fed’s QE Program Is Anti-Inflationary?


A Benjamin Cole post

Stanford luminary and economist John Cochrane is touting the fiscal theory of the price level (FTPL), in which the anticipated future of federal budget primary (operating) deficits is the key tell in present-day inflation. If the national budget looks re-inky, then inflation will result.

Cochrane contends FTPL is why the Fed’s QE program has been met with an inflationary yawn. The federal budget deficit outlook is unaffected by QE.

Set aside modern-day empirical observations to the contrary (isn’t the federal budget operating deficit slated to widen?), and let’s run with Cochrane—but also with a June, 2014 paper from the freshwater (okay, dry-gulch) Dallas Fed, “Inflation Is Not Always and Everywhere a Monetary Phenomenon” by Antonella Tutino and Carlos E.J.M. Zarazaga.

Though of dual peninsular heritage, Tutino and Zarazaga are devout FTPL’ers who cite the Teutonic success in bashing Weimar Republic hyperinflation through FTPL tactics—but…

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About Jim Rose

Utopia - you are standing in it promotes a classical liberal view of the world and champion the mass flourishing of humanity through capitalism and the rule of law. The origin of the blog is explained in the first blog post at

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