Last week, Treasury Secretary Janet Yellen told CNN’s Wolf Blitzer “'I think I was wrong then about the path that inflation would take.” She admitted there was a “miscalculation” in the way the Fed and the Biden administration assessed the risk of inflation.
Okay, we know this, so what? It’s sort of a big deal because she’s the only Biden administration official who was bold enough to admit that their public stance on inflation was not only dead wrong but embarrassing. Inflation was not “good” for the economy nor was it anywhere near “transitory.” But there’s more to Yellen’s mea culpa than just “egg on the face.”
Go on: It tells you that our Treasury Secretary who happens to be a former Fed Chair, the Biden administration, and even the Fed itself are almost clueless as to what they’ve unleashed. It tells you that despite the money supply surging to unprecedented levels in 2020, none of them gave regard to the basic monetary principle that too much money chasing too few goods might somehow produce an inflationary environment.
Our thoughts: If they couldn’t figure out the train was derailing at the onset of the derailment, how can we still trust them to commandeer the train?
Wasn’t it not even a year ago we were told that inflation would, in fact, be a “good” thing? That it was “transitory”? Not a serious threat. Now we’re finding that the media, Wall Street economists, Fed officials, but most of all, the Biden administration, were all wrong. Does anyone pay a price for gross incompetence anymore?
Last year, headlines were filled with inflation cheerleaders. We searched the term “inflation is good” and got back 508 million hits.
What’s troubling about this expert consensus is that inflation, now at a 40-year-high, isn’t good for anyone.
It skews business and personal decisions, wrecks family budgets, makes millions of low-income families even poorer, destroys personal thrift and wealth, undermines faith in the economy, distorts financial markets, and discourages investment and innovation.
And, eventually, it destroys real economic growth, undermining the very underpinnings of our prosperity and standard of living. We’re on the way to that now.
Which brings us to our main point: The failure of our “experts,” “elites” and elected officials to attack the root causes of inflation, namely runaway government spending and the Fed’s relentless money printing, based on bogus Modern Monetary Theory, that makes the spending possible.
No one in the Biden administration wants to step forward and accept responsibility for the inflation mess. That’s why it looked almost brave as one person finally stepped forward this week to admit there was a miscalculation.
“I think I was wrong then about the path that inflation would take,” Treasury Secretary Janet Yellen told CNN’s Wolf Blitzer this week, after he asked about her calling inflation a “small risk” just last year.
Good start. But in the next breath, she fobbed off blame on a host of other factors:
“As I mentioned, there have been unanticipated and large shocks to the economy that have boosted energy and food prices and supply bottlenecks that have affected our economy badly that I, at the time, didn’t fully understand, but we recognize that now,” she said.
Excuse us, but the causes of our inflation problem were evident even back in 2021.
The administration was repeatedly warned, as we noted, by some of its own party (hello, Larry Summers) about the inflationary impact of $1.9 trillion in added COVID spending, along with the still-alive proposal to spend another $5 trillion on the foolish pork-barrel “Build Back Better” infrastructure plan.
And Yellen knew about the record surge in the money supply in 2021, a clear indication that our economy was headed for soaring inflation. The Fed helped the government print $14.5 trillion in new money from April 2020 to June of 2021, the biggest money supply surge in the nation’s history. It didn’t boost output that much. Inflation was inevitable.
As Fed chief from 2014 to 2018, Yellen must know that latter point. Too bad she comes from the Keynesian school of economics, which denies such self-evident economic truths.
She, as do so many others, seems to have forgotten or ignored the clear lessons of the 1970s, when soaring spending (a 269% real increase in government spending during the decade), and out-of-control money printing to pay our monthly oil bill from the Mideast, set off scary levels of inflation that peaked at close to 15% in 1980.
We’re in a similar place now. Only, our president doesn’t seem to get it.
This week, he basically admitted he didn’t fully understand the baby formula shortage, which has sent prices for formula spiraling as much as 300% in some markets. “I don’t think anyone anticipated the impact of the shutdown of one facility – the Abbott (Laboratories Inc.) facility,” President Joe Biden told reporters Wednesday.
Except, it was his administration that shut the plant in February due to safety concerns, leading to a formula shortage. And Biden was fully apprised of it in a meeting with manufacturers three months ago.
“We knew from the very beginning this would be a very serious event,” said Robert Cleveland, senior vice president for North American operations of the Reckitt Co., as reported by RealClearPolitics.
And contrary to the idea that inflation’s “good,” news in recent days shows just how wrong that is:
- Baby-formula inflation is hitting low-income families hardest.
- This week, the USDA warned Americans that eggs, a nutritional staple in many households, may soon cost $1 each.
- Meanwhile, a new study by The Center Square says that a quarter of all Americans intend to put off their retirement because of inflation.
“Nearly 60% of those surveyed said that inflation has adversely affected their personal finances, of which about one in four said that they have felt a major impact,” according to the Center Square. “As a result of inflation, 36% of Americans have reduced their savings and 21% have reduced their retirement savings. A quarter of Americans will need to delay their retirement.”
Biden has privately raged at aides about inflation, but only to blame others for the catastrophe caused by his own policies. It’s a disaster that could cost his party control of Congress and him the presidential election in 2024, if he runs again.
As our friend Stephen Moore noted, “In this administration, it’s always someone else’s fault. Inflation is now the No. 1 concern of voters, so the White House first blamed COVID. Then Donald Trump’s tax cuts. Then Vladimir Putin. Then meatpackers and the poultry industry, Big Oil and pharmaceutical companies.”
A report from the University of Pennsylvania’s Wharton School said that inflation cost the average family $3,200 last year. Newer estimates say inflation could cost families as much as $5,200 this year, according to Bloomberg. That’s quite a cut in a family’s standard of living, especially since wages aren’t keeping up with inflation.
All this was foreseeable by our media and our elected leaders. Those who told us inflation would be a “good thing” were wrong as hell. So were those who told us it would be transitory. Don’t worry, none will be fired.
Worst of all, the White House has once again shown why it is now one of the least popular administrations in modern history: It is incapable of acting in the public interest, and responds only to one side of the political spectrum. But political arrogance has a cost, and we’ll likely see that result in this year’s midterm elections.
Originally published on Issues and Insights.