Rising Prices Are a Consequence of Bad Politics

Politicians chose economic contraction as their virus-mitigation strategy

Letter to WSJ. 

"Mr. Warsh is convincing on Federal Reserve incompetence, but in some respects he is too kind. He should ask how a central bank that employs 850 Ph.D. economists could be so obtuse. How could it not understand that huge increases in the money supply, accompanied by massive fiscal deficits, result in rapid inflation? How could Janet Yellen push for even more deficit spending when inflation is accelerating?

Maybe it’s that inflation is a godsend to heavily indebted governments. Such debt can be repaid in devalued dollars. Inflation also benefits many who own tangible assets. It harms those who work hard for modest incomes and invest in certificates of deposit or relatively safe bonds.

At the Federal Open Market Committee meeting a year ago, the median forecast for inflation for this year was 1.8%—about a third of what the personal-consumption expenditures increase will be. You can now count on the Fed to move cautiously to counter inflation. It will find new terms to replace “transitory” and ignore the chances of a wage-price spiral. It would help if Fed governors who are not infected with groupthink were appointed to vacancies.

Em. Prof. Robert F. Stauffer

Roanoke College

Salem, Va."