I was going to post on Alan Blinder’s op-ed in the Wall Street Journal examining the reasons for the present inflation. The TL;DR version is that none of it is Biden’s fault.
However, Barry Ritholtz’s post on the underpinnings of the present inflation is so much better IMO we should consider it seriously. Mr. Ritholtz attributes the present inflation to (roughly in descending order of importance):
1. Covid-19
2. Congress
3. President Biden CARES Act 3
4. President Trump CARES Acts 1+2
5. Consumers (overspent without regard to cost)
6. Consumers (shift to Goods)
7. Russian Invasion of Ukraine
8. Just in Time Delivery (supply chains)
9. Fed/Monetary Policy
10. Wages/Unemployment Insurance
11. Home Shortages
12. Semiconductors/Automobiles
13. Corporate Profit Seeking
14. Tax Cuts (2017) / Infrastructure (2022)
15. Crypto
which he follows with a more detailed analysis of each of the factors. I would quibble with some of his remarks but all in all I think he’s produced a very good first order approximation. Maybe better than a first order approximation.
Examples of some of my quibbles are that COVID-19 and the policy responses to COVID-19 aren’t the same thing and I would place the Fed higher in the list of contributing factors than Mr. Ritholtz does. I would also add two additional factors: appointing Jerome Powell as chairman of the Fed, for which President Trump must shoulder the blame, and re-appointing him, which is clearly President Biden’s fault.
Don’t get me wrong. I think that Dr. Powell is in a no-win situation. If he had acted with more alacrity he would have been blamed and not re-appointed but not having acted with alacrity he comes in for more blame for high inflation. Nonetheless he’s proving day by day that he’s not the right person for the job.
There are many things that Mr. Ritholtz gets right. Blaming Congress is always a safe bet. He correctly attributes at least part of the housing issues to the rent jubilee:
The Eviction Moratorium also plays into this; the unintended consequences may be that landlords are raising apartment rents in order to catch up on lost revenues from nonpaying renters from 2020-21.
I commend the entire post to your attention.
Seems like a good list but I’d probably quibble with the order a bit and put the Fed up much higher.
Yes, that was my take.
I honestly don’t think COVID-19 should be in the list at all. After all, the list doesn’t contain human nature, the laws of economics which derive from human nature, or harsh weather. The policy responses to COVID-19 on the other hand might well be included. They were political. They were decisions. They were trade-offs. They weren’t laws of nature or the inevitable outcomes of natural phenomena.
China’s clinging to its zero COVID policy is still part of the problem and it’s not a law of nature, either.
Sure, but absent Covid this doesnt happen at all and we dot have inflation.
Steve
I have to confess, I’m rather disappointed in the post. Its, to be blunt, as I tend to be, high school level.
Trying to parse inflation into splintered precursors has been the goal of every politician since there were politicians. And too their partisans.
We listen at our peril. Its the perfect point of departure to blame everyone but the source. We have inflation because of monetary and fiscal policies in place for quite some time. The result of free beer promises, accommodated by a no-balls Fed. I exempt Yellin not because she has no balls, but because she is an idiot.
You reap what you sew. I hope yall’s portfolios are properly adjusted for what is here, and coming. I suspect political views may prevent that. I mean this most seriously. Please don’t let your biases get in the way of protecting your futures.
PS –
Dave castigates Trump as ill suited etc. Yes, he’s a dick. Why these non-policy issues? How about what was working? Or not? In my lifetime:
Kennedy was a dick. Johnson a dick. Nixon a dick. Clinton a dick. Bush 2 a dick. Obama the worst dick. Biden is a horrid dick. Grow up. People in line for the presidency aren’t model citizens. They are people who can win the presidency. People who don’t look at efficacy in politics fascinate me. Demanding propriety is an almost child-like standard.
PSS – the truth is, the hallowed Roosevelt was a dick, and a court packer and authoritarian of the first order. Christ. We are going to listen to the Pelosis of the world?
I’ll give you just two examples of the many ways that Trump was unfit for the job. He was unable to attract and retain capable staff. That was extremely obvious from the very start. And not only did he not understand the job or the government well enough to do the job his mindset prevented him from learning. Together those doomed his presidency from the very start.
It isn’t enough to advocate some of the right policies.
I think you are being way too dogmatic about inflation Drew and what Ritholz did is actually useful. The Fed didnt wake up one day and decide to cause inflation. Again, absent covid none fo this happens.
Thanks for the investment warning. We have been reading th literature on crypto and since it was developed by true free marketeers and totally independent of govt fiat money (that stuff is all fake) we put a lot of money in crypto to hedge. Working great, just as predicted. /S
Steve