Inflation Pressures Building

There has been considerable discussion in recent weeks about the prospect and threat of rising inflation. This inflationary scare comes at a time when the government is unleashing massive stimulus measures to bailout states, businesses, and consumers – all in the name of combatting the pandemic.

We’ve already seen a $1.9 trillion helicopter money drop this year, and the Biden administration appears just to be getting started.

Person Holding Blue and Clear Ballpoint Pen

Image Source: Pexels

The latest reading of the government’s CPI (Consumer Price Index) continues to suggest that inflation so far remains low. Even if we do experience inflation, government officials continue to assure, it will be transitory. Despite these weak guarantees, financial establishment luminaries are starting to sound the alarm and Americans are becoming increasingly concerned about soaring inflation.

Former Treasury Secretary Lawrence Summers along with former IMF Chief Economist Olivier Blanchard recently voiced concerns over President Joe Biden’s $1.9 trillion stimulus plan, suggesting that so much new largess on top of all last year’s large stimulus packages could cause the economy to “overheat.”

Inflation is a tax on savers, wage earners, and those without sound money or hard assets, so while the exact definition of “overheat” remains under debate, it seems clear that a sudden rise in price pressures could cause the Fed to lift rates rapidly, potentially causing job losses and other issues as the economy slows.

Such a scenario could lead to a period of higher inflation or even 1970s-style stagflation.

Considering more than 25% of all U.S. Dollars ever printed have been printed in the last year, would anyone be surprised?

The ongoing threat of inflation could lead to more buying of gold and other hard assets. Fed chief Jerome Powell has suggested time and again that the central bank would be comfortable allowing inflation to run hot for a while before taking any action to calm price pressures.

1 2
View single page >> |
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.