John Cochrane’s Lesson on Inflation

Philipp D. Dubach reflects on John Cochrane's inflation lecture, highlighting the complex relationship between government debt, inflation, and fiscal policies. Cochrane's fiscal theory suggests that a government's ability to service its debt hinges on future primary surpluses, which can alter perceptions of inflation and purchasing power. This post argues that while inflation might fall, purchasing power may remain diminished, alongside a critical view on how different assumptions affect economic forecasting, particularly in the context of AI investments and government liabilities.