Who’s responsible for inflation in the US?
Is it the Federal Reserve for printing all that new money and piling assets onto its balance sheet?
Or is it the government, for asking the Fed to print all that new money for an unprecedented stimulus spending package?
Six of one, half a dozen of the other.
It hasn’t helped either that the US is wilfully sabotaging its own economic interest in order to put pressure on President Putin. Restricting the global supply of oil sends the price higher, benefiting Putin, who controls Gazprom by proxy if not in person, but to the detriment of US consumers, who are being stung at the pump time and again.
In some parts of the US, stickers with an image of President Biden pointing are being affixed to the price display on the pumps. The wording on the sticker reads: “I did this.”
And no matter how much President Biden seeks to deny it, it seems that voters agree.
The President’s approval ratings continue to hit new lows, as he continues to be battered by the fractured nature of American discourse. The old fissures on abortion and gun control remain as potent as ever.
But the issues that are really swinging it this time round are newer.
One is cultural: Federal authorities have labelled parents as potential domestic terrorists for standing up in opposition to critical race theory at school board meetings. That, combined with an obsessive ongoing desire to mandate masks in school, has given the clear impression that the Democrats are anti-children. And that cuts right across all known demographics, and is a big part of why virtually everyone is predicting a major drubbing for the party of the left in this year’s mid-terms.
The other major reason is, of course, economic.
President Obama just about managed to get the economy working again in time for President Trump to come in and take the credit. But to be fair to Trump, he didn’t then mess it up. At least not personally. It was covid that did that – shutting down the economy and then pumping trillions of newly printed dollars into circulation.
Those proponents of modern monetary theory who said this wouldn’t cause inflation ought to ask for refunds on their economics degrees, because the inflation already was well underway before Mr Putin recklessly sent his tanks over the Ukrainian border.
And yet, while inflation was almost inevitable after covid, there’s a clear sense at large that it never needed to be this bad. President Biden’s policies – specifically, his urge to spend on the scale of the sainted FDR - have made it worse.
Whether that’s fair or not is somewhat moot. But only somewhat. At no point did President Biden urge caution and prudence and level-headed thinking. On the contrary he piled headlong into a policy of ramping up borrowing even higher, tasking future generations with the tasks of paying off the debts incurred today – another anti-child policy.
Does he regret it?
Politically, it would be unwise ever to admit such a thing.
But the noises coming out of both the government and the Fed are at last showing that they take the problem seriously. Critics may say it’s eighteen months too late.
But the Fed at least has a clear understanding of what needs to be done. Eschewing the usual tendency to bafflement and nuance in its statements, the Fed has been unequivocal – several half point rises are now on the cards - at least until September, and maybe even after.
That in turn is likely to push unemployment up, which will of course be another negative in President Biden’s campaign to get Democrats elected this November. Yet again, the party of the left will be open to the charge that it doesn’t have the interests of workers at heart.
If that charge can be levelled in the midst of a recession, the outlook for Biden does indeed look grim. Already, there’s been one quarter of economic contraction this year. Will there be another? Fed chair Jerome Powell is deftly trying to avoid that outcome by signalling those half point rises for June and July.
But there’s a sense in which he’s running short of ammunition.
If the Fed hadn’t been fecklessly printing money for years, the whole situation would of course be a lot easier to manage.
So who’s responsible for inflation in the US?
Conspiracists would argue it’s the deep state, and that government and the Fed are to all intents and purposes indistinguishable.
A more pragmatic answer might be: no-one. The problem isn’t who’s responsible, it’s that no-one has any vision or central guiding light, and everything’s just being made up on the hoof.
Remember that the people in charge told you inflation wouldn’t happen?
Well, it did.
And it makes you wonder whether what they’re telling you now has any more validity.