Ten months earlier, Jeremy Siegel gave a warning about the price trajectory.
Since the start of the pandemic in 2011, the money supply has increased almost 30%. This money will not disappear. “That money will find its way to spending and higher prices,” Siegel told CNBC in a May 14 interview. This increase in money supply could lead to inflation of 20 percent within the next two-three years.
It wasn’t just him who raised the alarm. A few months earlier, before Congress approved President Joe Biden’s $1.9 trillion American Rescue Plan, several prominent economists had warned that the stimulus bill—the third major one passed since the outbreak of COVID-19 just a year earlier—was too big and threatened to overheat the economy.
Lawrence Summers was the Treasury Secretary in the Obama administration. Summers stated that there is “a possibility” that macroeconomic stimuli on a scale more similar to World War II than regular recession levels could trigger inflationary pressures like we’ve not seen for a generation. Washington Post Published in an op-ed February 2021. There is a risk inflation expectations could rise because of the way administration officials dismiss the possibility that inflation may occur and their inability to mobilize congressional support for spending increases or tax cuts.
“I think we do not need to spend $1.9 trillion…and we should have a smaller program,” Olivier Blanchard, the former chairman of the International Monetary Fund, wroteIn response to Summers’ op-ed, Twitter users responded. Biden’s proposal to pump another $1.9 trillion into America was made on top of an unprecedented fiscal stimulus. high personal savings ratesDue to the pandemic. Americans had been preparing to spend more to acquire the same goods that the pandemic ended. The increase in demand for the products would make it impossible to produce the required output. He predicted that “strong inflation” would result. warned.
“This would not overheat,” he said. wrote. It would start a fire.
Economists were surveyed in July after the American Rescue Plan had passed, just a few short months later. The Wall Street JournalAccording to the Americans, they should prepare for inflation levels not seen in over 20 years. This dire forecast was a miscalculation.
These criticisms are not political and were not made by Republicans hoping to impose high levels inflation on Democrats in the lead up to midterm elections. The sobering assessments were made by economists and mainstream academics. One of them was a former Obama adviser. These worries were ignored by the White House, who downplayed them, even though prices rose in the second half 2021. They claimed that rising inflation was not a permanent problem. Jerome Powell, Chairman Federal Reserve, was forced by the end to concede that it wasn’t.
It is important to remember this historical fact because the White House has attempted to excuse the high inflation rates in recent years. They blame Russian President Vladimir Putin for starting the war in Ukraine. Last week, new data from the Labor Department showed that inflation rose to 7.9% in the last year. The White House responded by saying that today’s inflation report was a reminder that Americans are facing budget cuts due to price increases. Families have already begun to feel the impact of Putin’s price increase.
The argument is that Russia’s invasion of Ukraine—and the global response to it, which has included cutting off purchases of Russian oil and gas—are pushing prices higher throughout the economy. Biden stated Friday that the recent spike in gas prices was largely due to Vladimir Putin. It has nothing whatsoever to do with American Rescue Plan.
While gas prices are up dramatically over the past few weeks, it is true that they have increased significantly since Russian troops entered Ukraine. Biden’s insistence on blaming the recent weeks for a year with steadily increasing prices is also absurd.
Last week’s Labor Department report that showed inflation reached 7.9 percent, looked at prices for the period February 2021 to February 2022. Putin began his invasion of Ukraine on February 24, and the White House wants you to forget 361 days’ worth of data so that we can focus only on the events of the past four.
It’s certainly possible that the war in Ukraine—and the disruptions it has caused to global fuel and food supply chains—will put more upward pressure on prices. Until the April consumer price index reports are released, however, this information will not be available in government data.
Biden claims that the main cause of inflation is rising gas prices. It’s true that higher gas prices will push other prices higher as a result—because higher fuel prices make it more expensive to ship anything from place to place. The White House has rightly stated that overall prices have been rising more quickly than energy prices. The Labor Department has the most up-to-date data. It shows that overall oil prices rose 25.6 per cent and gasoline prices increased 38 percent.
But if that’s all Putin’s fault, how do you explain the fact that energy prices—and gasoline prices, specifically—had been rising faster than just about anything else for much of the past year? The Labor Department announced that gasoline prices had risen 58 percent, and energy prices rose 33 percent in November. These numbers were 26% and 42% respectively in August. The events that are unfolding here seem to go much deeper than those of the previous weeks.
Putin’s invasion of Ukraine is making a big difference. However, gasoline demand surged earlier than that when people with cash and no interest in flying due to COVID-19 worries, got their family cars on the roads in the middle of the COVID-related shutdown. This made the spring 2021 travel record number rise by new heights,” Bruce Yandle wrote last week. Yandle is a former executive director at the Federal Trade Commission, and an economist at Mercatus Center. Reason.
And finally, we come back to those economists that warned last year about the dangers of Biden’s stimulus package. It is unlikely that Siegel and Summers had any kind of prediction about Russia’s invasion in Ukraine.
What they were predicting—and, indeed, what we are now seeing—was persistently rising prices due to an excessive amount of money being dumped into the economy. It is just dishonest for the Biden Administration to attempt to explain inflation without looking at its own policies.