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Tags: shovel | ready | solyndra

Reject Predictable, Conventional Fixes for Inflation

inflation and the diminishing spending power of currency

Nicholas Chamberas By Monday, 26 July 2021 03:51 PM EDT Current | Bio | Archive

It's a natural inclination for some to tend to ignore those things which are not readily undertood.

A case in point is the tendency of the Biden administration’s reaction to the ugly upward spiral in the cost of many essential consumer goods, painfully felt by many. 

American families are being pressured financially causing appreciably heightened levels of financial distress.  

While a trip to a luxury spa can be considered "splurging," going to the supermarket to pick up some milk and eggs should not be akin to visiting an expensive boutique.

Prices for basic foodstuffs have gone up dramatically since the onset of the pandemic.

President Biden has gone to great lengths to describe the considerable increases in prices as "temporary," insisting inflation is not threatening our economy.

Several companies like Conagra, Mondelez, Hormel Foods, Unilever, and General Mills have announced that they will be raising prices in the future.

According to the U.S. Bureau of Labor Statistics, the price of gasoline is up 46%, used cars are up 45%, and washing machines nearly up 30%.

According to CNBC, even the cost of public transportation is up over 17%.

This is the kind of dangerous inflation that we haven’t seen since the economic misery of approximately the mid-to-late 1970’s.

A dangerous assumption seemingly being made by the bean counters advising the Biden administration is that wage growth will keep up with inflation.

As unemployment benefits expire and more workers return to the job market this fall and coming spring, more people will be competing for the same jobs, hardly an inducement for companies to increase wages.

A recent analysis in The Wall Street Journal expects that wage growth won’t keep up with inflation and mentions that price stability is cited as a top concern at a recent Fed Listens Town Hall in San Francsico.

The average worker understands this problem, the Biden administration does not.

To be fair, inflation in and of itself is rarely the central cause of an economic crash.

Yet this time we are in challenging territory; the economy didn’t crater because of a stock market tumble or too many foreclosures (familiar phenomena for economists).

The economy is obviously being tested by the lingering effects of a deadly pandemic.

It’s much harder to anticipate consumer behavior during a time like this or how companies will react to dealing with anticipated escalations in production costs — whether real or imagined.

The negative impact inflation is having on budgeting and financial forecasting can't be overstated. In past economies, if the economy was overheating and prices were going up, the Fed would usually increase interest rates producing a reduction in the money supply and liquidity.

Thus, the problem usually solved.

Combating inflation often requires decreasing the money supply, in the economic situation we find outrselves in now, that could end a recovery arguably underway or even cause a recession or depression.

Small businesses and independently owned companies are vital to creating new jobs and sustaining an economic recovery; right now, many independent businesses still require access to capital funding just to stay open.

Decreasing the money supply and making it harder for small businesses to secure loans will only lead to job losses, not price cuts.

Republicans must resist the urge to warmly embrace the predictable, conventional, yet facile calls for raising interest rates sooner than expected.

The GOP must display a fresh mindset when it comes to fighting inflation, involving fighting hard for restoring the Keystone XL Pipeline and exposing the Biden infrastructure "plan" for the donor rewards slush fund it really is.

Companies are paying dramatically more for fuel than they ever would have expected even under a Biden administration. Higher fuel costs hurt workers, companies who have to source parts, vendors who have to deliver products, and everyone else in between.

Skyrocketing energy costs are contributing to higher prices.

Companies aren’t just trying to figure out how to make up for having to pay almost 50% higher transportation related costs, but wondering whether this is just the tip of a very ugly and treacherous iceberg.

While progressives would be apoplectic, resuming construction of the Keystone XL Pipeline would send a strong message that the U.S. government is no longer willing to nurture chaos in the energy sector.

Note to Team Biden: Bicycles aren’t good for (on a large scale) delivering semiconductors, or other critically and urgently needed goods and services .

At this point any Republican who thinks they are negotiating in good faith with the Biden administration on infrastructure is delusional.

America needs real infrastructure now because improving our roads will alleviate a host of economic burdens on businesses; yet, the Biden proposal spends next to nothing on roads and pours trillions into pork barrel projects favored by donors.

Injecting trillions of dollars not tied to job creation will only produce more inflation and job losses. "Shovel ready jobs" are great when they are real, but toxic when simply a euphemism for a bunch of new "Solyndras."

Nicholas Chamberas has advised good government advocacy groups, elected officials and political candidates on public policy matters as well as having served as a senior adviser on several prominent New York City campaigns. He holds a degree in Political Science and a Juris Doctor. Read Nicholas Chamberas Reports More Here.

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Republicans must resist the urge to warmly embrace the predictable, conventional, yet facile calls for raising interest rates sooner than expected.
shovel, ready, solyndra
Monday, 26 July 2021 03:51 PM
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