Originally Posted by
causecelebre
Its not direct govt spending that causes inflation as you suggest. The issue is QE and providing banks with cheap money. If G. Robertson and the finance ministry actually had any clue they would have priced their bonds better. When The Bank (RBNZ) buys these bonds (at a huge loss to the tax payer, and I have commented on this in the past so won't revisit that now) it paves the way for the govt to provide further stimulus. The Bank issues dollars to itself to buy bonds, mortgage backed securities, etc. This money makes its way back to the banks which can be lent out stimulating the economy. As the binds mature and the coupons from those bonds are then used to buy more bonds and the cycle continues.