Ever since the COVID-excused spending started conservatives have been explaining how the vast sums of money being printed and spent by the federal government would inevitably
lead to inflation. Those warnings were ignored, and even suggestions that the spending be reduced and targeted were ridiculed or attacked as being cruel.
Now the federal government’s latest inflation report shows prices rose 5% in the last year, the highest inflation we've seen since 2008.
With the inflationary spiral starting to come on with a vengeance the explanations have turned into urgent warnings that inflation is here, and the economic damage of Biden’s spending and other inflation-inducing policies is going to be severe.
Our friend David McIntosh, President of the Club for Growth, released the following statement in response to data on inflation announced by the Labor Department on Thursday:
Joe Biden is simultaneously flooding the economy with federal spending while unnecessarily paying people not to work – a recipe for disaster. At every point, Biden has put the priorities of the radical socialist wing of his party first, and this is why American families are seeing skyrocketing prices and a stalled recovery.
Mr. McIntosh’s analysis is supported by many commentators, such as US News & World Report that noted even though more than 9 million people remain unemployed, companies report difficulty finding workers and have been forced to bid up wages to get applicants. On Tuesday, the government reported employers added 1 million new openings in May, bringing the total of open jobs to a record 9.3 million.
As our friend economist Stephen Moore noted, “There are families [that] get $100,000 of government benefits. If you can get $100,000 of government benefits for not working, it’s going to be hard to get people back on the job.”
On her must-read website conservative economic commentator Trish Regan analyzed a report from Deutsche Bank that reached these important conclusions.
“Despite the shift in priorities, central bankers must still prioritize inflation,” the Deutsche Bank report says. “Indeed, history has shown that the social costs of significantly higher inflation and greatly expanded debt servicing obligations make it hard, if not impossible to reach the social goals that the new US administration (among others) is keen to achieve. We fear that the vulnerable and disadvantaged will be hit first and hardest by mistakes in policy.”
“We are witnessing the most important shift in global macro policy since the Reagan/Volcker axis 40 years ago. Fiscal injections are now ‘off the charts’ at the same time as the Fed’s modus operandi has shifted to tolerate higher inflation. Never before have we seen such coordinated expansionary fiscal and monetary policy. This will continue as output moves above potential. This is why this time is different for inflation,” the report said. “The effects could be devastating, particularly for the most vulnerable in society.”
And inflation, driven by Biden’s policies and spending, is becoming a worldwide problem.
Canada’s Globe and Mail reported China’s May factory gate prices rose at their fastest annual pace in over 12 years due to surging commodity prices, highlighting global inflation pressures at a time when policy-makers are trying to revitalize COVID-hit growth.
Investors are increasingly worried pandemic-driven stimulus measures could supercharge global inflation and force central banks to tighten policy, potentially curbing the recovery.
China’s producer price index (PPI) increased 9.0 per cent, the National Bureau of Statistics (NBS) said on Wednesday, as prices bounced back from last year’s pandemic lows.
The PPI rise in May – the fastest on-year gain for any month since September 2008 – was driven by significant price increases in crude oil, iron ore and non-ferrous metals, the NBS said.
And as Deutsche Bank noted, this new inflation is occurring in sectors that seriously affect families with lower income; used cars, food, furniture, airline fares and apparel all contributed said the Bureau of Labor Statistics.
For example, core inflation in April saw a significant contribution to used car prices pushing inflation upwards of 2% YoY mainly because prices of used vehicles on the month jumped 21% YoY according to ZeroHedge.com.
The bottom line: As Stephen Moore said, “The best thing Joe Biden could do right now is stop spending, stop borrowing, stop regulating, and let the economy get better on its own.”
Biden recovery plan
COVID-19 stimulus bills
Club for Growth