One popular line of thinking in GOP circles is that Joe Biden’s trillions of dollars of stimulus spending is a big driver of our current inflation. Stop the spending (and Biden’s plans), the thinking goes, and inflation will retreat.

Is that right? Not really. As Dan Mitchell and Robert O’Quinn write, Milton Friedman’s statement about inflation –that it is “always and everywhere a monetary phenomenon” — is still true. The culprit(s) behind inflation, then, are central banks…including the Federal Reserve:

Price inflation occurs when the supply of money exceeds the demand for money, which reflect the cumulative decision of households and businesses. To resolve this imbalance, households and businesses bid up the prices of goods and services until the supply of money and the demand for money are back in balance. In other words, price inflation.

Notably, none of the mechanisms that central banks use for monetary policy (buying and selling government securities, setting interest rates paid on reserves, loans to financial institutions, etc) have anything to do with federal spending or budget deficits.  The Fed and other central banks can maintain price stability regardless of whether governments are enacting reckless fiscal policies. All of which helps to explain why scholars (see here and here) do not find a meaningful statistical relationship between deficits and inflation.

That doesn’t mean reckless fiscal policy doesn’t have a profound, and dangerous, downside:

Excessive government spending, large and sustained budget deficits, and a rising level of government debt eventually may cause investors to get nervous about whether governments will honor their financial commitments. To the extent that investors think a government may be heading toward a Greek-style fiscal collapse, those investors may demand higher yields on government bonds to compensate them for the higher risk of default. Higher yields increase the cost of servicing government debt, potentially creating pressure to restrain spending on entitlements and other programs.

Needless to say, politicians will not want to do that. As such, they in response may press central banks to pursue a more accommodative monetary policy to reduce interest rates and lower government debt servicing costs. This has happened before in the United States. Between 1945 and 1951, the Truman administration cajoled the Fed to hold down the yields on long-term Treasury bonds to contain debt servicing costs after the large accumulation of federal debt during the New Deal and World War II.  The Fed acceded to Truman’s demands.  The result was high price inflation.  Between the end of World War II in September 1945 and the Treasury-Fed Accord in March 1951, which ended this practice, CPI-U rose by 43 percent.

Yes, by all means, hold the political class accountable for piling up debt like it was going out of style. But never forget that inflation is too much money chasing too few goods. A Federal Reserve that’s poured trillions of dollars of stimulus into the U.S. economy since the Great Recession more than a decade ago guaranteed the inflation we see today. And they are only now — and reluctantly — coming to recognize the immense mistake they made.