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Opinion Republican Senator Tom Cotton Admits Trump, Not Biden, Caused Inflation

18:07  02 december  2021
18:07  02 december  2021 Source:   nymag.com

Biden should signal to the Fed that it's okay to raise rates next year

  Biden should signal to the Fed that it's okay to raise rates next year There are indications that inflation is creeping into Americans’ psyches as it did in the late 1960s. Therefore, if inflation stays elevated, the Fed must be prepared to act without worrying about the political consequences. In the end, containing inflation would be positive for the economy's long-term outlook as well as for President Biden's reelection prospects.Nicholas Sargen, Ph.D., is an economic consultant and is affiliated with the University of Virginia's Darden School of Business. He is the author of "Investing in the Trump Era; How Economic Policies Impact Financial Markets.

Republicans have been hammering the Biden administration over inflation. Democrats have tried to respond by blaming supply-chain shortages caused by the pandemic. But Republican senator Tom Cotton has a completely different theory: He blames inflation on Donald Trump’s poor selection to lead the Federal Reserve.

Intelligencer; Photo: Stefani Reynolds-Pool/Getty Images © Intelligencer; Photo: Stefani Reynolds-Pool/Getty Images Intelligencer; Photo: Stefani Reynolds-Pool/Getty Images

Cotton’s view, laid out in a Wall Street Journal op-ed, places the blame for inflation squarely on Jerome Powell, the Fed’s chairman. “Mr. Powell’s Fed has forced millions of American families to choose whether to pay the mortgage, feed their families, fill up their gas tanks, heat their homes or buy Christmas presents,” he argues.

Inflation narrative is flawed

  Inflation narrative is flawed There's a big problem with the current inflation narrative: It may not be the whole story. Beyond the Covid-19 pandemic, surging demand and supply chain issues, there's also the roles played by corporate America, President Joe Biden and the Federal Reserve.The inflation narrative is largely set. The coronavirus pandemic created supply chain snarls. It put production out of whack. As demand has roared back following Covid-19 lockdowns, prices have soared.

Cotton makes this case in the course of explaining his forthcoming vote against Powell’s renomination. And obviously, Cotton is not trying to blame Trump (whose name does not appear in his column). But the reason Powell has the job in the first place is that Donald Trump appointed him.

Trump selected Powell in large part because he deemed his predecessor, Janet Yellen, too short to effectively handle monetary policy. Once in office, Powell was an inflation dove, leaving interest rates low in order to run the economy hot. Trump was constantly demanding Powell push interest rates even lower.

Cotton’s view implies that Powell was wrong, and Trump was even more wrong:

Mr. Powell also maintained the Fed’s radical emergency monetary policies a decade after the end of the 2007–08 financial crisis. The Fed had thereby already exhausted the normal tools of monetary policy when the pandemic hit and was forced to use unprecedented levels of government intervention to prop up the U.S. economy. As a result, the Fed’s balance sheet is nearly $9 trillion and continues to grow by more than $100 billion a month. For perspective, the Fed’s balance sheet barely surpassed $2 trillion after the financial crisis.

Poll: 77% of Americans now say inflation is personally affecting them — and 57% blame Biden

  Poll: 77% of Americans now say inflation is personally affecting them — and 57% blame Biden More than three-quarters of Americans (77 percent) say inflation is affecting their lives as the holiday season begins, according to a new Yahoo News/YouGov poll — and a clear majority (57 percent) blame President Biden. Republicans (32 percent) are also far more likely than Democrats (8 percent) to identify inflation as America’s biggest problem right now, and to say that Biden isn’t doing enough to address it (87 percent). Yet inflation worries aren’t merely partisan. Nearly 7 in 10 Democrats (69 percent) say inflation affects their lives at least "some" — not all that many less than the number of independents (79 percent) and Republicans (90 percent) who say the same.

Of course, the flip side of elevated inflation levels is that the economy is growing rapidly and unemployment is falling fast. Cotton doesn’t like the trade-off, taking the position that keeping inflation low is the only objective of monetary policy. (“The Fed’s core mission is to ensure stable prices and a sound currency,” he writes, omitting any role for balancing low inflation with low unemployment.)

I happen to think Trump’s preference for low interest rates and a hot economy was correct. Cotton disagrees. But whatever your position on the merits of the Trump-Powell interest-rate regime, Cotton is telling us that inflation levels are Trump’s fault, not Biden’s.

Inflation is back: will you win or lose? .
© William SALIGOT / Ouest-France Gasoline has increased 22% in one year. We had not seen this decade. Prices increased 2.8% in one year. Hence the inflation compensation of € 100 paid in December 2021. Not sure it is enough to ease concerns. This is a new economic data inflation is back after ten years of evolution measured price, interspersed with a peak in 2018. What consequences? Here are some answers.

usr: 1
This is interesting!