The Fed Is the Main Inflation Culprit (But Federal Government’s Spending Spree Was The Icing On The Inflation Cake)

Confounded Interest ^ | 12/15/2021 | Anthony B. Sanders

[Browns Ultra Fan]

There was an interesting op-ed in The Wall Street Journal entitled “The Fed Is the Main Inflation Culprit”.

I agree with the op-ed, but as Paul Harvey liked to say, “And now for the rest of the story.”

The Federal Reserve is only half of The Federal government “Stimulypto.” Starting in late 2008, The Fed crashed their target rate to 25 basis points and began their quantitative easing (QE) program where The Fed purchased Treasuries and Agency Mortgage-backed Securities (MBS) amongst other assets. Notice in the chart below that QE was adjusted, but never went away and The Fed’s target rate only was increased once before Trump’s election as President, then raised eight times then decreased five times. And no rate increases under Biden. So The Fed scorecard is Obama/Biden: 1 rate increase. Trump: 13 rate changes. And The Fed’s balance sheet has gone bananas since the COVID outbreak.

Inflation, as measured by the Consumer Price Index (CPI) didn’t really take-off until March 2021 as a result of STIMULYPTO (excessive monetary stimulus + Federal government spending).

Here is the Federal government spending surge that helped generate the highest inflation in a generation.

So while the op-ed author blames inflation solely on The Federal Reserve, The Fed was unable to achieve its inflation goal for much of the post-financial crisis period. It was the double whammy of Fed monetary stimulus + Federal government stimulus (spending) that pushed inflation to 6.8%.

Following Paul Harvey’s “The Rest of the Story,” I choose baseball player Whammy Douglas to represent the double whammy of Fed + Fed government stimulus to produce inflation. THAT is the rest of the story.

The WSJ op-ed author was focused only blaming The Fed. Sorry, it was a Double Whammy.

[Browns Ultra Fan]

Throw in Biden's "green" energy policies driving up energy prices by 50% and we have an inflation party!!

[SaxxonWoods]

“The Fed Is the Main Inflation Culprit (But Federal Government’s Spending Spree Was The Icing On The Inflation Cake)”

Completely backwards. Govt. spending has had the FED in a box performing triage for 30 years.

[butlerweave]

The Government should go back to a Budget with none of this extra Super wasted spending

[MeneMeneTekelUpharsin]

The Fed will NOT do anything significant to control inflation. Any action that would actually start to reverse inflation will tank the economy. That would cause a wipeout for the Democrats in the midterms. They'll ruin everyone in the country and lie continuously to avoid that.

My late father said that people vote their pocketbooks, they do not vote for what is right or wrong. Unfortunately his words have proven to be true.

[blackberry1]

Politicians cannot survive deflation, recession, depression. Like a cage animal, they will inflate, inflate, inflate.

Their very poliitical livelihood depends on economic growth and expansion. That goes for the voter base as well.

Candidates Clinton, Trump and Biden never uttered the words.... balance budget. Tightening is the death nell to our political way of life.

Central banks have globally printed their way out of the Covid pandemic and the gapping hole caused by the global shutdown.

We will kick the can until there is some kind of cataclysmic event worse than Covid.