Commentary
All over the developed world, voters identify inflation as a significant concern. They do so for good reason.
Inflation is stubborn and brings hardships at all levels of society. If left unchecked, it will stifle growth prospects. As is always the case, today’s inflation stems primarily from faulty monetary policies. But if monetary mismanagement is, as always, the basic cause, there can be other contributors.
One such contributor that deserves special attention today is the fallout from ill-conceived green initiatives.
The monetary roots of the United States’ current inflation are clear. The Federal Reserve (Fed) had for years willingly accommodated reckless spending by the federal government. Because of the pandemic but also to pursue a raft of other policies, Washington increased spending at an unsustainable rate of almost 20 percent a year between 2019 and 2022. Budget deficits exploded, averaging almost 11 percent of GDP for 2020, 2021, and 2022. All through this time, the Fed supported the government spending binge with a flood of new money, raising the pace of money growth from 5.4 percent a year during the prior five years to 20 percent a year between February 2020 and February 2022….