It is difficult to imagine product price levels remaining tame over the longer haul had there been such an expansion of liquidity. In the event, of course, inflation has remained largely contained. To be sure, the tripling of crude oil prices has left its mark on “headline” inflation rates and inflicted considerable pain on some sectors of our economy.
Therefore, in order to stimulate private consumption, it is essential to reduce future uncertainty as much as possible. According to textbook Keynesian economics, the expansion of fiscal expenditure financed by the issuance of government bonds will stimulate an economy unless taxpayers hold back consumption reflecting expectations of a future increase in the tax burden.