The Federal Reserve and the Biden administration are now forced to deal with emerging stagflation. However, they should not be too hawkish on curbing inflation. Most people’s falling real incomes will do their work for them.
Government spending, which was much too inflationary, now creates the danger of flipping to a policy with too sharp a slowdown. The Fed is determined to over-correct for its error of continuing to create too much new money. The negative impact of the Ukraine war, and the oil sanctions, reinforces the case that we should abandon all proposed tax increases, reopen our domestic energy sector and let the market sort things out as it always does.
Additionally, our educational systems need to teach our students how our financial system works. They need to understand what is happening and why the situation we are now dealing with happens in cycles. In the past 15 months, the purchasing power of our dollar just decreased by no less than 7.5 percent. Put simply, Inflation is a hidden tax on everyone’s income.
John Branthoover
Arlington
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