Joe Biden Didn't Cause Inflation; elections won't fix it

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Inflation will not be decided by elections, big economic challenges

The current political campaign focuses on inflation. The rough has to be blamed for the higher prices and even for the downturn that hasn’t happened yet.

Financial condition can always be better. But right now, things may be better than they appear. And they are definitely different.

First, some good news. The US is a world economic superpower with the world’s leading currency. When times are tough, people want dollars.

A stronger dollar cuts the cost of imports, benefiting our consumer-based economy. But this drives up the price of US exports. This is in part due to rising prices around the world, thanks to shortages and supply chain disturbances. And higher revenues bring new benefits for some industries like oil.

The glory days of American industrial production began to fade in the 1970s. Now, in the wake of the COVID slowdown, manufacturing is growing again at the pace it was 50 years ago. More people now work in factories than before the virus hit.

The US is doing better than other major economic powers. China has a COVID problem. Europe and Brexited Britain face conflict with large increases and decreases in fuel prices, high inflation and low industrial output. Then, there’s Russia!

We continue to expect unemployment in the US to rise as the Federal Reserve raises interest rates in hopes of reducing inflation. But the Fed’s moves have not yet led to unemployment, which remains low.

Higher interest rates raise costs, but the situation may not be as bad as we think. The Fed is bringing rates down to the level it used to be called normal. For over a decade, they’ve been historically low and we’ve gotten used to it.

Contrary to the common mantra, the biggest help has come from the central government. To combat the effects of COVID, the need to renew infrastructure, the climate crisis and bring back production from abroad, the Biden administration and Congress have poured trillions of stimulus dollars into the economy. It worked.

The result is record high government debt. This could have been acceptable if interest rates were low, but paying it back later could lead to losses. But this is left by both the political parties for another day or generation.

If everything is so good, why don’t people feel better?

In this country, the answer is clear that the prices of essential commodities – food and fuel – are much higher than they used to be. Inflation occurs when too much money chases away too few goods. That’s exactly what happened.

There are two reasons for these price increases: COVID-19 and Russia. The virus brought a recession when millions lost their jobs or faced cuts. Some workers chose not to return after the vaccination developed. The employees demonstrated demanding better wages. The production could not meet the normal demand.

Russia’s unexpected and devastating land war in Ukraine caused an inevitable disruption of the world’s oil and grain supplies. Russia used oil as a weapon to force its customers to accept its invasion, but the customers protested, raising the price of fuel around the world. This cut grain exports from Ukraine, raising the cost of wheat and other grains.

These factors contributed to the uncertainty, which could lead to a collapse in the economy. Its relatively abrupt decline from the top ranks of the world economy followed the British decision to leave the European Union. Recently, this has added to the uncertainty.

It comes down to managing policies for central banks like the Fed that will try not to overdo it and end up with a recession while trying to combat inflation. The uncertainty about their chances of success raises even more doubts.

Although the economy appears to be emerging as the key issue for many voters, no election outcome – putting Democrats in charge or handing over the veto to Republicans – will not change much. Problems are not merely a short-term matter of national politics.

The world economy is entering a historic transformation, almost every century apart, at the level of social welfare such as the Industrial Revolution or Social Security. After another century, we may be turning a new corner.

Technology has the potential for major changes with new demands on growing artificial intelligence, remote working, a more educated workforce, tax policy and deficit spending, business and the domestic economy. it will never be the same.

It is possible that prices may never fall below the level they are at now. The workers have forcibly paid the new minimum wage without any government action. Bringing produce home from China, a good policy, will cost more. Tackling climate change has its own price tag.

Such changes cannot be reversed by this year’s Congressional elections. The economic reality in America and around the world will impose itself on us. No president or Congress can change that, but they must now strive to make the best of the newly emerging economy.