At last we have something that really brings the American people together: inflation. Everyone hates it. It’s the whole topic of conversation at stores, on streets, at the park, or any setting. Want to make a friend? Just walk up to anyone and start complaining about prices. They will join right in and off you go. New besties.
The inflation problem is roiling American life in every respect. It’s wrecking financial planning. It’s changing travel plans. People are scrambling to get a smaller car but there are few available. Houses are hotter in the summer for fear of electrical bills. That diet everyone wants to be on is suddenly much easier. And it’s time to cut back on all the regrettable substance habits you pick up during lockdowns.
Every prediction is that the inflation alone is enough to discredit the Biden administration, since the worsening seems to date almost perfectly to the day he took office. That would seem to indicate that a Biden-friendly Fed would make it a top priority to crush the price increases with some Volcker-style austerity starting now.
I’ve doubted this would happen to any great extent and for three reasons. First, the money expansions of 2020–21 are already here and need to become endemic, to use language developed during COVID. Prices need to adjust one way or another. The Fed can mop up some excess but not easily and not completely.
Second, the Biden administration has a mixed view toward inflation itself. Early on we got some hints when Biden and his spokespeople had the message of an upside: the rise in fuel prices will speed the necessary transition to wind and sun. This is a creepy view because it means that our standard of living will be sacrificed for a perverse Rousseauian vision of how we should live. And yet there should be nothing surprising here: this is precisely what Biden had been promising all along.
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