Inflation

Cardi B, the well-known rapper and mixologist, has finally acknowledged the financial reality facing many Americans today. Last week, she tweeted, “When y’all think they going to announce that we going into a recession?” Cockburn notes that such astute words perfectly capture how the Biden administration has raised costs for everyone, from the working class to those who can afford to live in this economy, also known as millionaires. Thankfully, the administration responded to her concerns. Janet Yellen, the secretary of the treasury, replied, “Don’t look to me to announce it. I’m not going to announce it. I don’t think we’re going to have a recession. I expect growth to slow down. We have a very strong economy.

All is not well with the economy. It’s true that 390,000 jobs were added last month, exceeding estimates, while hourly income is up 5.2 percent since May 2021. However, analysts guessed unemployment would drop a tenth of a percent, which didn’t happen. Gas prices keep rising, as GasBuddy.com reports a 43 cent jump over this time last month. It’s enough of a problem that OPEC has agreed to increase production in July and August. The economy remains stricken by inflation, with Treasury Secretary Janet Yellen issuing a mea maxima culpa earlier this week. “I think I was wrong then about the path that inflation would take," she told CNN on Tuesday.

Inflation is about far more than rising prices. In this excerpt adapted from Inflation: What It Is, Why It’s Bad — and How to Fix It, the book’s authors explain how the debasement of money ultimately corrupts society. The scenario is fairly standard: central banks devalue money; prices shoot up. Governments look for ways to tamp down inflation by keeping people from spending. They also respond with price controls, capital controls, higher taxes. Governments grow larger and often impose more constraints. People lose their freedom, and worse.

And just when everything was looking so tidy — the Ukraine war, a new Covid subvariant, mass shootings, a woked-up Disney operation — what should come along to light up our lives but 8.5 percent inflation? And who, I ask you, ought to wonder? Like acid reflux and obstreperous two-year-olds, inflation ranks high among human durable goods: always looming, never gone for long, even when it pulls back, and even then leaving its indelible marks. This, due to another human durable: the determination of governments, autocratic as well as democratic, to mishandle the pretended spreading of economic joy.

"Young people do not degenerate; this occurs only after grown men have already become corrupt.” — Montesquieu, The Spirit of Laws, 1748. The great test of a generation is whether it leaves better prospects for its descendants. Yet by virtually every indication, the baby boomers, and even the Gen Xers, are leaving a heritage of economic carnage — as well as a growing social and cultural dissipation that could shape our future and the fate of democratic self-rule, and not for the better. This legacy comes not from outside forces, but the investment bankers, tech oligarchs and their partners in the clerisy who have weakened their national economies and undermined the chances of upward mobility for most young people.

Federal Reserve Chairman Jerome Powell looked calm when he testified before the Senate Banking Committee in February 2021. He’d just been asked by the folksy Louisiana senator John Kennedy whether he had concerns about the dollar supply being the highest it had been since 1946. “Right now, I would say the growth of M2, which is quite substantial, doesn't really have important implications for the economic outlook,” Powell stated. “M2 was removed some years ago from the standard list of leading indicators, and just that classic relationship between monetary aggregates and economic growth in the size of the economy, it just no longer holds. We've had big growth of monetary aggregates at various times without inflation, so something we have to unlearn, I guess.

The Federal Reserve raised interest rates by 0.25 percent last week, the first increase since December 2018. Back then, Donald Trump had been very vocal in his criticisms of the Fed and its chair Jerome Powell, demanding no more rate increases. There was no resistance from the White House this time with press secretary Jen Psaki saying that the Biden administration respected the Fed’s independence. Powell called the rate increase necessary due to inflation coupled with rising prices. “As we emphasize in our policy statement, with appropriate firming in the stance of monetary policy, we expect inflation to return to 2 percent while the labor market remains strong,” said Powell, before warning that it will take longer than expected for inflation to sink.

The Putin price hike. That’s the line the Biden administration is using to absolve itself of blame for higher gas prices. “Russia is one of the three largest oil producers in the world,” White House spokeswoman Jen Psaki said in a social media video meant to deflect criticism from President Joe Biden. “And the fact that they started this conflict, invaded a foreign country, and they are such a big producer of oil in the world is the reason why the global oil markets are disturbed and why gas prices are going up.” The administration banned Russian oil imports this week, with the House of Representatives approving a similar ban on Thursday.