The Way Out of Our Inflation Mess
The Federal Reserve’s premature victory lap over inflation reveals a worrisome misunderstanding of the predicament we still find ourselves in. Unprecedented government spending and debt, combined with mounting fears that the debt can’t (or won’t) be repaid, played a misunderstood role in inflation’s rise several years ago. As such, fiscal policy must be part of the solution.
Otherwise, expect the recent acceleration of inflation to stick around or get worse, bringing trouble for the new administration.
The pressure on the Fed to declare the race over and continue lowering interest rates is real. It would be a mistake to cave any further. Some measures show inflation holding steady. Others show it trending back up since last July. Either way, it’s above the Fed’s 2 percent target, and now the 10-year rate is pointing up.
To understand what’s going on, remember how we got here.
When COVID-19 and the overreaction of lockdowns arrived, Washington dramatically increased spending through stimulus checks, enhanced unemployment benefits, and other means. Spending rose by over $5 trillion, with the Fed accommodating much of that. Congress and President Joe Biden’s administration later added another $4 trillion in various large legislation. Unlike previous crises—recall former President Barack Obama’s promise to halve the deficit within five years of the end of the Great Recession—there was no plan to offset the spendin
Article from Reason.com
The Reason Magazine website is a go-to destination for libertarians seeking cogent analysis, investigative reporting, and thought-provoking commentary. Championing the principles of individual freedom, limited government, and free markets, the site offers a diverse range of articles, videos, and podcasts that challenge conventional wisdom and advocate for libertarian solutions. Whether you’re interested in politics, culture, or technology, Reason provides a unique lens that prioritizes liberty and rational discourse. It’s an essential resource for those who value critical thinking and nuanced debate in the pursuit of a freer society.
