Central Markets by Robert Lloyd, CFA

The information contained herein has been obtained from sources believed to be reliable, but the accuracy of the  information cannot be guaranteed. All opinions and outlooks are subject to change.

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Inflation Series: Part 3 Government spending is inflationary


While the peak pandemic stimulus spending is ebbing, the level of government spending appears to be stabilizing at a new higher level. On an absolute level, government spending never seems to decline; it just rises at variable levels of steepness. On a relative basis compared to GDP, US Federal spending was ~20% of GDP prior to 2008, stabilizing at 22% after the financial crisis. Now it appears to be stabilizing at 24% of GDP after the pandemic crisis.


Government spending is a drag on real economic growth because dollars are removed from the private sector by either taxation or debt driven spending. I'm not saying this is good or bad, but as a policy choice, it implies lower growth and higher inflation going forward.


Robert Lloyd, CFA®

Chief Investment Officer

Lloyds Intrepid Wealth Management

Lloyds Intrepid LLC is doing business as Lloyds Intrepid Wealth Management. Lloyds Intrepid LLC offers investment advisory services in the State of Texas where registered and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. Lloyds Intrepid LLC and its advisers do not provide legal, tax or accounting advice. Lloyds Intrepid LLC formulates retirement plans, investment strategies, portfolio construction and investment due diligence for clients with signed investment advisory agreements with us. The information contained herein has been obtained from sources believed to be reliable, but the accuracy of the information cannot be guaranteed. All opinions and outlooks are subject to change.


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