Inflation is already starting to be felt by Americans. This week, the Bureau of Labor Statistics reported that the consumer price index jumped again in May, bringing the inflation rate over the past year up to 5%, the biggest jump since 2008. Economists had been expecting it to reach 4.7%.
Inflation is essentially a tax that hits the poor and middle class the hardest because it makes everything you buy more expensive. People who were already worrying about how to cover the bills will now have to stretch the food budget a little further or try to cut down on driving (you might have especially noticed the leap in gas prices since Joe Biden became President and declared war on the domestic fossil fuel industry.)
Treasury Secretary Janet Yellen and the Fed assure us that this is just a temporary price spike caused by pent-up demand and reduced supply, due to the pandemic coming to an end. And that might be part of it. But inflation also happens when you flood the economy with dollars by running the printing press 24/7, like trying to stimulate the economy with trillions and trillions of dollars the government doesn’t actually have. The more of anything that exists, the less it's worth, and that’s true of dollars as well.
During the election, Biden infamously declared, “Milton Friedman isn’t running the show anymore.” Since becoming President, Biden has doubled down on his defiance of the Nobel Prize-winning free market economics icon, just as he’s defied reality on a number of other fronts, from border security to energy. But as I predicted even before he took office, his biggest opponent would not be the Republicans, it would be reality.
Simply declaring that Friedman’s wisdom about how money works (and has always worked and always will work) no longer applies and that America can now print money out of thin air and hand it out to everyone without creating hyperinflation and crashing the economy, won’t make it so.
I fear that Biden’s arrogant defiance of the unalterable facts of economics that Milton Friedman so brilliantly explained will prove as foolish as defying the old, dead, white guy Sir Isaac Newton and his outmoded ideas about gravity by leaping off a 20-story building. I also fear that the US economy will suffer the same fate.
The economists at Deutsche Bank are also not convinced that Joe Biden has rewritten the laws of economics and can flood the country with paper money without reducing the value of the dollar until we’re using them as toilet paper because it will be cheaper than buying actual toilet paper.