I guess the argument might be a monetary issue, inflation, should have a monetary solution. I am of the belief that inflation now is more monetary than having anything to do with supply issues, ect. I might be wrong. I as a Von Mises fan hate everything about central banking, and especially that Frankenstein, the Federal Reserve, created by Wall Street.
It’s a monetary, fiscal, energy, foreign, trade and regulatory policy issue. Add to that a productivity issue within the general population. Read that last one as a lack of work ethic. There is no single solution to get out of this funk. The Fed, like it or not, (I don’t) has its lane to stay in and very blunt tools to deal with inflation. They need to fix their balance sheet and raise interest rates. I don’t like the pussyfooting around with interest rates. Interest rates should have been raised one time to 10% or more to have a more immediate impact. None of this 75 or 50 basis points stuff that slowly gets interest rates to 10% or more. They are dragging out the pain. It needs to be recognized that any rate hike has little immediate impact. It takes months.
We are in for a long trip of vacillating monetary policy, just like the 1970’s. Expect the same thing from congress on the fiscal side of things. The Inflation Reduction Act starts spending us deeper into inflation in January. I expect unemployment to tick up and there will be calls for congress to do something. That, of course, involves spending money that the government does not have. If it’s not unemployment it will be some other “crisis” that requires spending.
Essentially the federal government and the Federal Reserve are not coordinating their responses to our economic problems. In fact, the government has been doing everything they can to do to undo anything the Fed does. The bright side is eventually the federal government will not be able to afford to borrow for their spending. The vast majority of our debt is short term. They presently can’t make principal payments, which means non-retired debt will be refinanced at higher interest rates. Maybe then we’ll see cuts in government. The alternative is printing more money. That will not work.