But, the most important sentence in that editorial, something I’ve been saying a lot, quote:
“The debate over transitory or persistent inflation boils down to whether the cause is monetary or pandemic-related supply chain shortages.”
Now it may be a dose of both.
I personally think eventually the containers in the port of Los Angeles will be unpacked, and we’ll get back to at least some sort of normalcy. Which I suspect will actually bring down some of those prices. And I’m very encouraged that great American companies like FedEx, UPS, Walmart, and target, and many others are pledging 24/7 transportation strategies to get goods on the shelves. I have no idea when normalcy will come. But I know it will come. Now here’s my big concern about inflation”
All year long this year the Fed continues to run an emergency policy when the emergency has long passed. They keep buying bonds, expanding their balance sheet, pumping money into a banking system that does not want the extra cash. And I’m quite sure all this excess money created by the Fed — let’s call it free money — has had a big impact on stocks, real estate, other assets.
They need to stop. And not some teensy-weensy bond-buying slowdown. They need to stop injecting unwanted excess cash into the economy. The emergency has passed. The central bank is not reacting. The Fed wants inflation to be hot and money supply to be hot. I don’t agree with either.
In effect, they are financing federal spending and borrowing. And that is inflationary. They also may be accommodating these individual price increases from the supply shortages. That is not good. It’s a 1970s type mistake, including monetizing the rising oil price. It spreads individual price jumps into across-the-board aggregate inflationary price increases. Not good. And they don’t seem to be letting up! This worries me a lot. Now one last point.
One reason the emergency is over is the Trump tax cuts. They are still in place. Unless and until the Biden’s reverse them. Not only are they in place spurring a second Trump economic recovery, they are paying for themselves. Overall revenues for fiscal 2021 up 18%.
Corporate revenues, get this — up 75%. Individual income taxes up 27%, cap gains up 33%. these are gigantic numbers. With great clarity, they are saying low tax rates have led to more…