The Fed flow of funds accounts are most useful to describe long-term, embedded trends, such as the stock buyback movement which has dominated equity market since the mid 1980s. However, these statistics are also useful in putting current debates into perspective.

The flow of funds accounts as of Q4 2008, shows Federal spending exceeding income by $513 billion. The current deficit for 2009, based on White House budget projections (which some consider over optimistic), shows a deficit of $1.7 trillion — three times as great.

Additional “stimulus” proposals, now under consideration, will increase this deficit even more.

What will turn the current White House plan from a temporary stimulus measure into a recipe for built-in endemic inflation is whether the money being spent becomes a permanent “entitlement”.

Since most of the people receiving this extra government spending have a vote, history has shown repeatedly, in various countries, that it becomes extremely difficult for politicians to turn off the spigot, depriving the electorate of income on which they have come to depend, even if this is inflationary.

Of course, this article is only an “expectation” and, in fact, an expectation that I hope does not come to pass.