Of course, neither of these assumptions requires much imagination. Indeed, history and our daily newspapers provide numerous examples. Unless governments are constrained institutionally or constitutionally, they often resort to the printing press to try to escape their budget problems. Yet, we all understand that this option is a recipe for creating substantial inflation.
3 Indeed, history shows that it is often a path toward hyperinflation. 4  1  In other countries and jurisdictions, such as the state and local level, pension and entitlement commitments also account for a significant source of the growth in commitments and thus are central to the fiscal problems. 2  See Sargent and Wallace (1981).