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Inflation has become a global phenomenon after the pandemic. The traditional conservative approach to dealing with inflation is high interest rates, wage stagnation, unemployment, and high taxes. Taking money out of the economy reduces demand, reduces spending, and controls the price-wage spiral.
The Biden administration courageously did not do so. Instead, they viewed post-pandemic inflation as a temporary phenomenon caused by the supply and demand shocks brought about by the pandemic—too few goods, and pandemic subsidies and savings provided a lot of money. They did not hesitate to stimulate the economy, risking higher inflation.
One thing to remember is that Biden’s alternative approach to inflation will be much tougher on consumers and households.
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