Stagflation is staring Biden in the face — but he refuses to change courseBy Glenn H. Reynolds
April 28, 2022
First we were told inflation was imaginary. Then we were told it was “transitory,” the result of COVID-inflicted supply-chain problems. Then we were told it was Russian President Vladimir Putin’s fault.
Now people are starting to admit the massive runaway spending of the Biden era has something to do with it. But we’re also facing stagflation, a mixture of inflation and slow growth, and the government also plays a role in turning inflation into stagflation.
As Milton Friedman famously warned, inflation is always and everywhere a monetary phenomenon. When the government pumps the economy up with excess dollars — something usually referred to as “printing money,” though a too-literal USA Today fact-checker hastened to assure us that much of the money created isn’t actually printed on paper — inflation results. When you have more money in the system than goods, the price of goods goes up. That’s inflation, and it’s what’s happening now.
We’re seeing it everywhere, from soaring food and gasoline costs to a housing “bubble” that looks more like inflationary pricing to increases in rents and automobile prices and just about everything else. The latest figures, meanwhile, show that the economy shrank 1.4% last quarter, making it the worst since the pandemic’s start; economists had expected 1.1% growth.
There are two ways to address inflation: Remove some of the money from the system, which the Federal Reserve did in the past via higher interest rates, and increase the supply of goods. At this point in 1980, when inflation soared, the federal funds rate was nearly 20%. Presently, it’s 0.33%.
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Source:
https://nypost.com/2022/04/28/stagflation-is-staring-biden-in-the-face-but-he-refuses-to-change-course/
