Incredibly, but also predictably, inflation has hit a fresh 40-year high of 9.1% following this morning’s CPI report. Looking historically, the run-up in inflation since COVID has been meteoric, now hitting the infamous levels of the 80s.
Who is to blame for record inflation?
In scrolling through Twitter, I noticed a lot were heaping blame upon politicians. I’m not here to defend anyone, nor do I have a political agenda. I’m just a kid from Europe watching what is happening from afar – I don’t care much about one side or the other.
Having said that, I don’t think there is any shortage of blame to go around. I have said my piece previously on Federal Reserve Chairman chairman Jerome Powell, who has yo-yoed back and forth on the Fed’s hawkish policy more times than I count at this point. But what about the last two respective presidential administrations – Trump and Biden respectively?
Joe Biden
“Our experts believe and our data shows that most of the price increases we’ve seen were expected and expected to be temporary,” Joe Biden, July 2021
Our experts believe and our data shows that most of the price increases we’ve seen were expected and expected to be temporary
Joe Biden, July 2021
The above quote, nearly one year ago today, is obviously a pretty jarring read in the context of the inflationary environment that transpired since. But Biden’s administration, Secretary of the Treasury Janet Yellen and Fed chairman Jerome Powell all were resolute in their claims that inflation was not a concern, with the word “transitory” consistently floated around.
It was then framed as a demand-driven ramp in prices.
“Part of what’s happening is not only on the supply side, it’s the demand side,” said Transportation Secretary Pete Buttigieg on CNN last October. “Demand is off the charts.”
As we entered the new year, Biden again reaffirmed that inflation was not an issue of concern, as prices continued to rise even higher.
“We are making progress in slowing the rate of price increases,” the President said following December’s CPI reading of 7%. The next month brought another bloated CPI number, rising to 7.5%, which Biden reacted with confidence, saying “While today’s report is elevated, forecasters continue to project inflation easing substantially by the end of 2022”.
With the transitory argument well and truly quashed as prices remained elevated, Biden blamed Putin for the continued inflationary readings. The Russian invasion of Ukraine undoubtedly exacerbated the issue, but it’s pretty clear, as I have written before, that inflation has been present long before February of this year when the war commenced.
Today’s inflation report confirms what Americans already know. Putin’s price hike is hitting America hard
Joe Biden, June 2022
I feel like a broken record at this point, seemingly writing this article every month, but at this point, I believe it is finally becoming clear to the Biden administration quite how badly they have underestimated inflation. Fed Chair Jerome Powell’s repeated back-and-forth and similarly empty assurances that inflation remains transitory and under control never got anyone to truly believe – except, of course, Joe Biden.
Donald Trump
Biden’s mismanagement of the fallout has, and continues to be, dangerous and disappointing. However, it needs to be said that he only took office in January 2021. Therefore the single biggest reason that we are seeing inflation now rip up people’s livelihoods was well underway before he was sworn in.
That reason would be money printing, which has been a scourge in recent times but was kicked up to a whole new level during COVID while Trump was in office. This sky-high printing, combined with exorbitant borrowing, was always going to end one way – with rampant inflation.
Inflation is a back-breaking phenomenon because it cripples the lower classes and widens inequality. It also gathers steam as it goes along, which is exactly what has happened in this instance. It’s a mathematical certainty that if you print more money than at any point in history – which is what has happened – then the value of that money goes down.
If you have one rare trading card worth a million dollars, and then the manufacturer prints 100 more of the exact same card, do you think that card will still be worth one million dollars? If not, why is it different for money? More money means the value of that money is lower. Let’s not overcomplicate this.
In signing off, there is a lot of blame to go around here – it’s not all on Jerome Powell and the Fed, as abjectly incompetent as they have proved to be. And it’s not all on Biden. Nor is it all on Trump. It’s a combination of all of these factors, and it’s not particularly difficult to see that.
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