Last May, this column contained the following words: “There is a risk that the fiscal policies of the federal government could lead to inflation. That policy is less a threat than the monetary policies of the Federal Reserve.”
That same column concluded with: “Timing will be critical when it comes to the resumption of normal levels of federal spending and when to begin restricting the money supply. That time is not yet at hand, but everything from government statistics to ‘out of stock’ notices on Amazon indicate that it may be closer than many experts previously predicted.”
Six months later, I wrote: “The situation is not yet urgent, but it is much closer to being so than it was when the topic was broached in this column in the middle of this year. Much will depend on how many more ‘waves’ there are in the COVID case counts.”
It appears the Federal Reserve may have waited a little longer than it should have to adjust its approach to management of the money supply. There was, in fact, another wave of COVID, and inflation has intensified. As noted in this space previously, it was not infrastructure proposals that caused the inflation; it was related to low interest rates and other measures of the Federal Reserve that were designed to keep the economy moving. It had been showing signs of weakness. The pandemic made things worse.
Undoubtedly, supply chain issues are still exacerbating the problem. The situation in Ukraine is not helpful, either. But it still seems like the Fed could have moved a little more quickly to help blunt the upward movement of prices. Even signaling earlier that they intended to act might have proved beneficial.
There is recognition of the problem, though. That’s a start. All too often, there is denial that there is a problem at all, much less what the causes of it might be. We seem to be through that stage. The major remaining issue is that many of the measures the Fed can take often require weeks to implement and months to become fully effective.
Rising prices hurt the working poor the most. Their already tight budgets become undeniably insufficient when each dollar they earn is worth a few percent less over the course of a year. So, there is a moral imperative to getting things under control as quickly as possible. At least that process seems to have gotten started.
It is a complicated process, to be sure. Elimination of the uncertainty created by Russia’s invasion of Ukraine would remove one obstacle to flattening this other type of non-pandemic curve. If the newer variant of the coronavirus proves – as is currently believed to be the case – less destructive than previous ones, then another X-factor would be taken away and the economy may be able to return to more stable and predictable footing.
But even if neither the pandemic nor the war come to an end, there are still things that can and should be done to alleviate the pain being felt by Americans as prices rise. Most of them are not things that can be done by presidents or by Congress – at least, not easily or quickly. Swift action by the Federal Reserve is what the situation calls for. Even if they are a little late, they seem to be headed in the right direction now.
Jason Nichols is a former District 2 Democratic Party chair, an instructor of political science at Northeastern State University, and former mayor of Tahlequah.