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Inflation miscalculation that makes Joe Biden’s life difficult

Inflation has risen across wealthy countries over the past year, Prices are rising rapidly in the United States, where prices rose 6.2% in October From the previous year. Inflation in the United States was partially exacerbated by Biden and his predecessor, Donald Trump, and during times when consumption patterns changed and did not return to normal rapidly, the US economy received more financial support than in other regions. Pour into.

Republicans have accused Biden of sharply rising prices in the economy as a whole in an aid package signed earlier this year.credit:AP

Republicans, and even left-wing economists such as former Obama administration officials Larry Summers and Jason Furman, have blamed the sharp rise in prices across the economy in a aid package signed by Biden earlier this year. They stimulated unbearably much consumer demand by the package’s direct support to Americans, including $ 1400 ($ 1944) checks for individuals and increased profits for the unemployed. It states that the price has skyrocketed.

Biden bets that these criticisms are largely wrong, and that the Fed would be wrong to follow their advice. His aides said that excessive consumer demand wasn’t the driving force behind the fastest price increases the United States had seen in decades, but completed work that would bring wages and employment to workers who had reached historical limits. To do so, the economy says it needs more fuel.

The President wants Jerome Powell, Chairman of the Federal Reserve Board. Who he reappointed this week Participating in his bet in the second phase — by avoiding what the White House authorities consider to be the real cause of inflation, which could hinder growth, that is, the rise in interest rates that do not deal with the virus. ..

“We are still addressing the challenges and complications caused by COVID-19, which is pushing up US family costs,” Biden won at the White House on Monday, announcing Powell’s reappointment and responsible for inflation. Inflated. The resurrected virus.

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Prices have risen significantly across the economy’s industry and sector, but there is a big gap between the physical inflation rates people buy and the services they consume. The consumer price index for services has risen 3.6% from the previous year. In the case of durable consumer goods, it increased by 13.2%. And these products occupy a much larger share of US consumer spending than they did before the COVID-19 hit.

On the eve of the pandemic, about 31% of American consumer spending went to commodities and the rest to services. In September, its share rose to about 35%, down slightly from the pandemic highs. These few percent points suddenly brought record levels of toys, electronics and other commodities from country to country, making a big difference in the supply chain that was tense under load.

White House member Jarid Bernstein said the $ 1.9 trillion bailout plan “suppresses demand and is important to the story of inflation, but much of that demand is a decline in face-to-face service consumption. This has led to an increase in demand for manufactured products. ” The Economic Advisory Board said in a speech this week.

“It is causing price increases in parallel with the impact of viruses on transport logistics.”

Powell provided a similar diagnosis at the White House on Monday. “The economy is expanding at the fastest pace in the last few years and is promised to return to maximum employment,” he said. “Challenges and opportunities remain as usual. The unprecedented economic resumption has led to imbalances in supply and demand, bottlenecks, and a surge in inflation, along with the continued impact of the pandemic.”

“The unprecedented economic resumption has led to imbalances in supply and demand, bottlenecks, and a surge in inflation, along with the continued impact of the pandemic.”

Federal Reserve Board Jerome Powell

Bernstein, his White House colleagues, and many liberal economists say price increases should diminish by next year. The current game is painful for consumers, but they say it is better than the alternative scenario of slow bailouts and slow economic recovery this year.

“Avoiding a serious recession is a big plus that needs to be balanced against the current inflation, and there is a deep denial of that,” said City University of New York, a fellow at the Liberal Roosevelt Institute. JW Mason, an economist at the John Jay Criminal Justice College in New York, said. “I don’t think there is a world where inflation will drop significantly and economic difficulties will be significantly reduced,” he added.

The tension has led White House officials to try to mitigate price increases, primarily by trying to mitigate supply problems. Earlier this year, they formed a supply chain task force to continue on products such as semiconductors (which ruined car production and soared car prices), wood (which raised the cost of housing construction), and food. Addressed high demand.

Over the past month, the administration has stepped up these efforts, announced new actions, reduced unprocessed water at ports, and surged global products that are contributing to increased inflation for many of the world’s wealthiest people. I tried to accelerate the flow. Biden announced on Tuesday that it would release 50 million barrels of oil from its strategic stockpiles in a coordinated move with five other countries aimed at lowering gasoline prices.

Authorities are also confident that inflationary pressures will ease as workers return to the employment market within the next few months as they have run out of savings from the support of the pandemic government. They emerged on Wednesday when the US Department of Labor reported that new claims for unemployment allowance had dropped dramatically to the lowest levels in half a century last week.

Still, according to the latest data released on the same day, annual inflation continues to rise at the fastest pace in 30 years, with rising energy prices and strong demand for goods and services leading to prices of 5 in the year to October. % Increased.

The Biden administration has discovered several large levers that can be pulled quickly to mitigate shipping delays that helped push up the price of goods. The economist says he is considering all the options for more action and is facilitating recent advances in reducing backlog at the port.

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It talks about the lack of specific details about how other policies can quickly clear the supply chain, or even ideas that come to mind from business groups or elsewhere. Biden’s recent meeting on this issue with leaders from 14 countries at the Group 20 Summit in Rome did not generate a groundbreaking agreement on the actions to be pursued.

Meanwhile, Biden’s team hopes that the Fed will not retreat its efforts to maintain patience for recovery and continue to drive economic growth too soon. One of the reasons Biden tapped Powell in another term is Instead of promoting Lael Brainard The Federal Reserve Board, which he elected as Vice-Chair, has given Republican appointed Powell his own bipartisan confidence in his actions as Republicans beat Biden over rising prices. It was the belief that I had it.

“In these times, we need principled leadership that has been steadily tested by the Fed,” Biden said on Monday. He added with a clear intention, without giving details:

This article was originally published in The New York Times.

Inflation miscalculation that makes Joe Biden’s life difficult

Source link Inflation miscalculation that makes Joe Biden’s life difficult

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