(UnitedVoice.com) – Since the onset of COVID-19 early last year, the federal government has pumped trillions of dollars into the American economy. Both the Trump and Biden administrations signed stimulus packages that gave checks to citizens to help them weather the pandemic. President Biden has also signed a host of other expensive measures into law, and he’s intent on spending trillions more.
Whoever is currently pulling the strings at the White House clearly believes all this cash will lift our economy and help us survive this difficult time. However, the truth is a little more complicated. As we’re starting to see, problematic price inflation could be the real result of all this extra spending.
The Post-Pandemic Inflation Era
Some inflation is inevitable, even in a normal year. In fact, gentle inflation is good for economies because it tends to accompany growth. However, chronic inflation makes money less valuable, and it looks like the US could be facing a more chronic situation now.
On Tuesday, July 13, the Labor Department reported that the monthly inflation recorded in June was the highest in 13 years. Consumer Price Index levels from last month also reflected a 5.4% year-on-year increase, slightly outstripping analysts’ predictions.
Some market experts, including Federal Reserve Chairman Jerome Powell and the White House Council of Economic Advisers, have suggested price spikes skew figures like these in certain areas. Different industries are recovering from the pandemic at varying paces; for example, motor vehicle prices rose especially sharply last month.
However, there are signs the problem runs deeper, and now, even administration insiders are acknowledging the potential severity of the problem.
Why We Could Be in Trouble
Larry Summers recently visited the White House to discuss his concerns with top economic advisers within the Biden administration. A former treasury secretary under the Clinton administration, Summers has been consistently critical of Joe Biden’s economic policies, especially his extravagant spending plans. He believes the spending packages, along with the ultra-low interest rates that have persisted, will lead to chronic inflation.
Jason Furman is another Democratic insider who thinks massive price increases could continue. He served as chair of the Council of Economic Advisers during the Obama administration and thinks our spiraling inflation rates are not just because of short-term, pandemic-related factors.
No one knows exactly what will happen next. Only one thing seems certain; the current market volatility will continue to make our economy unpredictable.
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