Despite literally trillions of dollars injected into the economy over the past year, inflation has remained extremely low, with the core rate remaining unchanged from last month and the general rate edging up only slightly higher, reported Bloomberg.

The 0.3 percent increase in the Consumer Price Index (CPI) was fueled mainly by rising oil prices, with other costs remaining either flat or increasing just barely. Yet the CPI rose by more than the completely unchanged Core Consumer Price Index (CCPI), which is generally considered to give a more accurate picture of what the economy is doing, as it smooths out the most volatile items. When looking over all of 2020, consumer prices rose by 1.4 percent in both the core and broad CPI, although this is still markedly less than the 2.5 percent increase the previous year, before any government aid at all was released.

Despite this latest in a year of more sanguine inflation figures, chatter that the U.S. will soon see major inflation has continued to persist. MarketWatch noted that while the rate is still rather low, its increase was the sharpest in five months. If nothing else, the rate is expected to increase by the spring report as the deflation last year won't be worked into the averages anymore. While the investor community has observed inflation remaining low, it has still been seeking both traditional and novel hedges against it out of concern that this will be the year it comes roaring back.

This stance has its skeptics, though, including the Federal Reserve, which in August announced that it would tolerate slightly higher inflation than normal on account of there having been little to none over the past decade or so. The Fed's move was an acknowledgement that, in defiance of conventional economic wisdom, the numerous stimulus efforts following the 2008 crisis failed to generate widescale inflation. While economists have spent years  mulling over the question "why"—with some theories being technology, globalization or an aging workforce—the reality is that, regardless of the reason, inflation has remained stubbornly low for years, the economy seemingly able to digest all stimulus measures with little need to raise prices.

The Fed, as well as those who share its thinking, observed that, just as the response to the last crisis didn't turn the United States into Weimar Germany, the CARES Act and other stimulus measures (including the Fed agreeing to serve as a backstop to the corporate debt market) have not done so either. Inflation hawks, though, have argued that it's simply the calm before the storm; while before the argument was that the next round of stimulus checks would burst the dam, now it is  that once the pandemic is under control, everyone will go on a spending spree and that is what will spark major inflation.

However advocates of Modern Monetary Theory (MMT), a theory gaining credence in some economic circles, argue that so long as the supply of money does not outgrow the goods and services available in the economy, inflation will never be an issue. While the Fed does not count itself among these ranks, its actions over 2020 have been seen by certain observers as a vindication of its core principles. This is not only in terms of how the theory views inflation (i.e. flow of money is more important than supply of money) but also in how government debt affects the broader economy. Advocates argue that so long as a government controls its own currency, it can effectively borrow as much as it wants so long as the debt is held by the central bank. This is because, by law, bond proceeds are sent to the U.S. Treasury, which includes the Treasury bonds that it issued itself. The Treasury, when it pays off this debt, will be sending money to the Fed, which by law will then move most of this money back to the Treasury. It is effectively as if it never issued the bond in the first place, according to proponents.

It is essentially the pragmatic response to taking seriously the idea that money is just a social agreement between people with no inherent reality beyond that which we give to it on any given day. As less and less money is in the form of paper or metal and more and more in the form of 0s and 1s, this becomes even more apparent.

With Democrats controlling both Congress and the White House, and with former Fed Chair Janet Yellen as Treasury Secretary, some have speculated that we will see the government leaning even harder into MMT as the year goes on.