Jul 16, 2022
In Welcome to the Forum
In other words, the inflation data that has been at a high of 8% in recent months (the core inflation rate after deducting food and energy is as high as 6%) is actually as infamous as the two oil crises in the 1970s. Expansion is actually pretty much the same. But the Fed spent much of last year seeing the price hikes as temporary and was slow to act until the first quarter of this year when it began to feel bad. The reasons for the inflation caused this time are more difficult to deal with than in the 1970s. In addition to the reduction in oil supply caused by the war and the price increase, and the closure of the city in Shanghai, the supply chain has been broken again. This time, there is an impact from the demand side. After the Biden administration company banner design took office, economic activities have begun to recover, but it continued the generous fiscal stimulus of the Trump administration and launched a rescue plan of up to 1.9 trillion US dollars, of which about 500 billion US dollars were distributed in the form of cash. Each of them gets $1,400, with some low-income families getting more. On the one hand, more consumer demand is generated, and on the other hand, some people decide to go out to look for work in a hurry when the economy is safe, resulting in a shortage of jobs in the labor market. Under the scramble of employers, not only the unemployment rate in the United States has reached a very low 3.6%, but wages have also begun to rise together with prices, making inflation worse. These factors actually emerged last year, so Lawrence Summers, the former president of Harvard University who was mentioned at the beginning and twice served as an official in the Democratic government, has frequently issued warnings in various media since last summer, arguing that the Federal Reserve Chairman Powell downplayed the risk of inflation. Therefore, it is unreasonable for the Biden administration to call the current inflation "Putin's Hike". After all, the signs and causes of inflation were planted long before the outbreak of the Russian-Ukrainian war. After the war, because of sanctions The resulting reduction in oil supplies only made things worse.