<i>In the underlying economy, this increase in spending is funded by consumption of real capital. (e.g. refraining from capital maintenance and using the funds for consumption activities instead</i><p>Surely it&#x27;s funded by expanded credit - after all, that&#x27;s the transmission mechanism for this?<p>And I said that raising nominal rates causes inflation to fall, so I think we&#x27;re agreeing there. Which in the current environment would imply CPI <i>de</i>flation and the ills thereof.