Commentary
Inflation “is destroying working folks’ pocketbooks and devaluing the wages they earn and the root cause … is way too much government spending, too many social programs … and vastly too much money creation by the Federal Reserve,” Larry Kudlow, former director of the U.S. National Economic Council, said on Feb. 14.
During the pandemic, the U.S. Federal Reserve (Fed) lowered interest rates, bought bonds and mortgage-backed securities (MBS), and increased the money supply by 40 percent, driving the current inflation rate to its highest level in decades.
The last time the United States faced runaway inflation, which was in the late 1970s, the then-incoming Fed Chairman Paul Volcker capped the money supply and was able to bring inflation to heel by 1983. However, the current Fed Chairman Jerome Powell believes that there is no connection between the money supply and inflation. Powell’s position flies in the face of the teachings of Nobel Prize winner Milton Friedman and most mainstream economists who caution that the government should not print too much money for fear of causing inflation.
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