my comment to the New York Times about rising inflation
The supply of money in the US is up $6 trillion compared to two years ago, from $15 trillion to $21 trillion. That's a 40% increase in two years, the largest increase in decades. I understand this huge increase in the money supply was meant to mitigate the effects of the pandemic on the economy, but now that GDP and industrial production have returned to pre-pandemic levels, all that cash is still out there, driving shortages and inflation. While the media continue to focus on "supply chain" problems, customers could not bid up prices and cause shortages like this if they didn't have 40% more cash on hand than before.
The 5 million people missing from the work force -- that's only 3% of pre-pandemic levels -- are probably people who changed the way their families relate to the economy because of the pandemic. They're people who retired early, decided to stay home to provide child care, went back to school, started their own business, or switched to the informal economy where they don't get a "paycheck" from an "employer". If we continue waiting for these people to return to the formal economy that 40% increase in the money supply will continue driving inflation higher.
The Federal Reserve needs to stop pumping the extra $120 billion of new money into the economy each month, and needs to start increasing interest rates to keep the economy from overheating.
The 5 million people missing from the work force -- that's only 3% of pre-pandemic levels -- are probably people who changed the way their families relate to the economy because of the pandemic. They're people who retired early, decided to stay home to provide child care, went back to school, started their own business, or switched to the informal economy where they don't get a "paycheck" from an "employer". If we continue waiting for these people to return to the formal economy that 40% increase in the money supply will continue driving inflation higher.
The Federal Reserve needs to stop pumping the extra $120 billion of new money into the economy each month, and needs to start increasing interest rates to keep the economy from overheating.