Joe Biden is now “The Great Deflector”, as he attempts to discredit the perfectly natural economic calculation that massive government spending leads to higher prices.
Biden is now blaming other people and events for his problems. Putin is responsible for the invasion of Ukraine. It is the greed of big oil companies. It’s the greedy ag industry.
His catch-all phrase for high prices and anything to do with them is “the pandemic.” This led to supply chain chaos. This created an unprecedented demand for goods.
If this is true, and it was at one point, then why do prices continue to rise at 8.3 percent per year?
Gas prices are starting to fall. The supply chain bottlenecks slowly unraveling, although they are progressing slower than expected. However, at least the goods are finally getting to market.
The best news is that wheat harvested in Ukraine has finally reached foreign ports. This should reduce the rapid increase in food prices. All of this should be combined with the Fed’s recent increase in interest rates, which should bring down prices.
What’s the problem?
The pandemic is now beyond our control. This is now a distant memory. The war in Ukraine is not the only culprit. The main commodities affected by the conflict are oil and wheat. They have both returned to their normal historical levels.
Instead, it is clear that Biden’s massive spending program, which he launched shortly after assuming office and was financed with printed money, has caused an artificial boom in America. Biden continues to increase his spending on the same programs. Biden has already spent $220 billion more to forgive student debt — a handout for the wealthy since the upper earning limit is a generous $125,000 — which will only increase demand.
Add to this the horribly misnamed “Inflation Reduction Act”, which adds $360 billion more — for $4.8 trillion in additional spending, since Joe Biden became president.
Inflation can be as much a psychological as it is an economic disease. A good example is the recent settlement of a rail strike.
The unions announced that workers will receive an immediate 14% increase and a total 24% increase over the 5-year agreement. They will also receive annual bonuses of $5,000, and their health care copays as well as deductibles will remain the same.
All workers will be entitled to an additional day off and the right to take time off for health reasons. This is a significant achievement that the unions demanded during negotiations.
Biden stated that it was a major win for both the unions as well as the American people. It is also a tacit acknowledgment of inflation’s presence, and workers should do their best to get as much as possible before prices rise further.
To keep inflation under control, the Federal Reserve requires your help. Rising interest rates won’t help the US if there is no restraint on government spending.
New York Times:
Krishna Guha, who is the head of the Evercore ISI global policy and central banking strategy team and has been forecasting that the Fed could cool inflation without causing a recession, said it is increasingly likely.
A deep recession seems the only solution, given the inability to maintain fiscal discipline at the White House and Congress.