In his latest Wall Street Journal column Joseph Sternberg suggests that Democrats are trying to increase inflation as a political and economic strategy:
Reduced inflation-adjusted labor costs are one way to maintain some modicum of U.S. competitiveness while the Biden administration saddles the economy with productivity-killing higher taxes and stiffer regulations. It’s time to stop talking about inflation (transitory or otherwise) as a side effect of the government’s various economic wishes and commands. Inflation is the ingredient Democrats hope prevents this policy soufflé from collapsing.
I don’t believe it’s a deliberate strategy. I think they’ve been persuaded that inflation is completely controllable and that you can’t make an omelet without breaking eggs.
The balance of his column is mostly dedicated to an explanation of why “transitory inflation” is a misconception:
What ordinary people know and economists too often forget is that while inflationary spikes may come and go, higher prices are forever. This spring’s inflation surge will lead to a permanently higher baseline. A lower inflation rate in the future will only moderate future increases from that new, higher base. The one thing that almost certainly will not happen is that prices will fall substantially to undo some of this allegedly “transitory†inflation. The Federal Reserve will fight tooth and nail to prevent that.
and, as Mr. Sternberg notes, there have been winners and losers in the increases in wages with fewer and fewer winners and many, many more losers. While it’s possible that the Democrats have been persuaded by their technocratic constituents, who are among those who have largely kept up with inflation, that it’s benign others of their constituents have not been so fortunate. IMO that’s an explanation for ever more blacks and Hispanics voting Republican: they feel abandoned and ignored by Democrats.
Back in the early 80’s, adjustable rate mortgages, the only kind then available, hit 21% APR. I had a 9+% fixed rate mortgage and was grateful.
Spending is now trillions of dollars greater than tax revenue. Half of last year federal spending was borrowed money. We might add $5T new debt this next year. How can we possibly avoid a Weimnar collapse. We already had the black shirt street gangs.
Based on your comments in a number of posts here you, too appear to have been convinced that inflation is controllable. I shake my head.
Inflation is something generally experienced differently by individuals depending upon their particular spending exposures at various times in life or other circumstances- education, health care, housing footprint, children, general life cycle spending pattern (net saver/spender) and so on. Some are more uniform. For example, most people have a tendency to eat food on a fairly regular basis. I don’t think it will be long – its probably already happening – until the CPI is downward biased.
Which brings me to Mr Sternberg. I think he underestimates what is going on. To be sure, step jumps in prices outstrip wages. And deflating wage costs can benefit owner class vs working class. (As I pointed out in a recent comment – wonder why Big Corp is so enamored with globalist trade policy and kowtowing to the progressives? Wonder no more.) There is so much blather about wealth inequality, but look at government policy at odds with stated goals. Democrats and RINO’s, and their voters, need to look in the mirror. This is by design.
But wait! There’s more! If you are an investor, you don’t want to be a lender in an inflationary environment. (See: yield chase) You want to be a borrower. And if you are the government, with no realistic hope of repaying your debt, and borrowing like crazy, what do you cherish? Inflation. This is by design.
Do blacks and Hispanics get this? I would say it in broader terms. I think in their guts lower class people of all stripes get it. Its a major component of Trumpism. As pointed out in comments recently, some will simply pull a lever out of habit. Some will accept just being on the dole. Some will look to free-beer-for-all nostrums. But many people see the sham, and they are voting accordingly. If you are in monopolistic or subsidized industries like education, health care, Mil Industrial Complex, Big Ag, Major League Baseball, media or bailed out banks you feel fine. But politicians understand the fragility of the gig. After all, its why a guy who could upset the whole sham had to be destroyed. And why Biden is behaving like a crazed Marxist and not a centrist.
I have said repeatedly that I think the preponderance of the evidence suggests that hyperinflation is not a species of inflation. Inflation is always and everywhere a monetary phenomenon. Hyperinflation on the other hand is a psychological phenomenon. IMO central banks have had pretty fair success in mitigating ordinary inflation but hyperinflation is uncontrollable.