2 ms·
‘Transitory’ was the ‘worst inflation call in the history’ of the Fed (2021)
- PaulHoule 4y agoI'm not sure. I think people are shocked at the high prices. I saw a Big Mac meal costs $9.99 at McDonalds and think "I can't afford that" and I don't buy it. I think the same about Subway and about the new little Thai restaurant downtown. Prices are even shocking at the supermarket. The shortages are still acute, quite a bit of the photography equipment I want is still not available. Economists say demand is dropping but if the supply isn't there you might just decide to make do with what I have. Milton Freedman pushed the idea that inflation is driven by inflation expectations. If I had lived through 10 years of inflation I'd see the higher prices and think nothing of it, or think "I'd better buy it now because it will cost even more in the future" or just carpe diem. Americans don't really believe in inflation yet so inflation will cause demand to drop which could slow down inflation. The greatest danger is that people get used to it. If the government raises interest rates to fight inflation they risk contracting the economy, if the supply chain problems and the general post Jan 6, 2022 breakdown in trust (e.g. look at the anti-take-any-action-about-covid fanatics on the "new" page or the blockheads who want to build a "trustless" economy) the inflation may still be ranging. The megarisk for the next four years is things going south with China fast (say an attack on Taiwan) and the resulting economic decoupling. I just hope the Chinese National Committee remembers why they decided not to give a general secretary a third term: it's a violation of norms comparable to what Trump tried to pull.