Voting Report:
Currently, the US is experiencing the highest inflation period in 40 years. But there are multiple causes unique to our time – national and international world events. Centrist voters must understand that the entire world economy is experiencing this latest inflationary cycle – not just the US. Plus, this unfortunate and unpredictable combination of economic factors has a feedback affect that puts pressure on further increases.
Don’t be fooled by the Republican finger pointing at the Biden administration for the midterm elections. This period of rapid inflation started during the Trump administration because of the Covid epidemic. Trump kept threatening the Federal Reserve (the Fed) Chairman complaining that the Fed was not acting fast enough (of course Trump was up for re-election). But time has shown that the Fed acted carefully and with purpose – and did not allow Trump’s bullying to affect their methodology. Managing the economy is as much art as it is science. Looking back at the history of recent economic policy, we will give the Fed the benefit of the doubt over any Republican bullpies.
Thus, the point we want to make to the Centrist is that neither the Obama, the Trump, nor the Biden administrations can be ‘blamed’ for the sudden rise in inflation. All the inflation causes have been heavily influenced by other local and world events. There is no quick fix, but the Fed has been at the forefront slowing down the money supply by gradually increasing interest rates – thus slowing inflation. This is a tried-and-true method used many times by the Fed before. It just takes time for their interest rate increases to take effect. It is like trying to slow down a speeding locomotive – you apply the brakes gently and gradually slow the behemoth down to an acceptable speed. Braking too fast and the locomotive may go out of control, jump the tracks, and crash – causing even more economic problems.
US inflation was relatively stable during the late Obama and through 2020 of the Trump administration. From 2012 to the second half of 2020 it averaged around 2%. An amazing period of relative economic stability. However, the Covid 19 pandemic erupted worldwide by February 2020. In the first half of 2021 inflation was up from 1.8% a year earlier, to 2.6%. Then the second half of 2021 inflation climbed to 4.5%. By June 2022 inflation increased to 6.2%, where it appears it will remain for a period of time based upon (1) current world events, and (2) the ability of the US Federal Reserve Bank to slow it down.
By mid-2020 the Covid epidemic had confined people to their homes, and caused the economy to shrink and many businesses to close or fail, especially restaurants, movie houses, and many other public venues.
To prevent the economy from collapsing, the Trump administration pushed Congress to pass several stimulus and loan packages. This amounted to several trillion dollars printed by the US Treasury Department and shot into the economy starting in March, 2020. It worked, but everyone predicted at the time that inflation would be the (bigger) price to pay in the next year or two. Of course, no one knew how long the pandemic would last – nor could they predict the 2022 Russia-Ukraine war.
Once this large amount of money entered American pocketbooks by mid-2020, consumer spending by pandemic confined Americans took off. Businesses began to reopen. But this time, the very workers needed to staff businesses, or manufacture and ship the goods, were either confined at home, or sick with Covid. This log jam made prices increase rapidly.
By early 2021, many Americans had been vaccinated although Covid variants continued to fly around the world and cause major worker disruptions. Business were reopening and the economic mood started to brighten. However, the economy was now growing too fast. Pent up demand exploded into a consumer frenzy for cars, houses, furniture, groceries, electronics, etc. Supply could not keep up with demand – especially because of recurrent employment Covid interruptions. Thus, supply chain interruptions. So, prices went up.
Then in February, 2022, Russia invaded Ukraine and the price of petroleum and wheat shot up – the staples of our economy, gas and bread. The Russian invasion has had a ripple effect around the world to this day. There being no end in sight with Russia just illegally annexing parts of Ukraine. China has had continual bouts of Covid causing lockdowns, and thus recurrent supply interruptions of goods into our economy. More price increases.
However, the US economy is doing well. Actually, quite amazing considering worldwide inflation, questionable energy, goods and food supplies. Winter is coming and Europe is uncertain how it will stay warm and keep their economy growing. The Biden administration has wisely resisted anymore ‘stimulus’ packages. And, the Fed is gradually slowing down the economy. Gas prices have declined and other price increases have slowed down, too. But it is world events that are the primary cause of our inflation now.
Nothing the Republicans can promise (to get themselves elected) will make a difference to the economy, and if they continue to imitate Trump (which they must) will make it much worse.
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