Is there a remedy for a surge in inflation?

Inflation indicators in recent days have stubbornly shown that the price surge continues to immerse us as consumers. The consumer price index grew at an annualized rate of 3.5% in March, beating expectations for the third consecutive month. Then again, aren’t investors and financial decision makers all of us with bank accounts? – playing the Federal Reserve’s guessing game.

What will the Fed and 500 economists do now? After all, this is an election year.

What about President Biden? Is there anything the nearly 2 million civilian government employees can do? For Federal Reserve Chairman Jerome Powell, the frustrating and painful combination of raising interest rates and systematically reducing the money supply may feel like a fabled King Canute attempt to counter the rising tide.

Legend has it that Cnut, the 11th-century Viking ruler of England, Denmark, and Norway, proved to flattering royal staff that even their king could not control the tide (no matter how much they wanted to). It is said that he tried. Canute moved his throne to the edge of the sea and ordered the tide to stop so that his feet and robes would not get wet. Of course, the king retreated to higher ground, paying no attention to the tide.

After advising his subjects not to expect the indomitable army to obey his orders, Canute began to take other actions to make life more comfortable. He began working to reduce customs duties and taxes imposed on citizens when they made the important pilgrimage to Rome, and devoted his energies to other beneficial changes, all of which focused on policies over which he had actual control. Ta.

Perhaps Fed Chairman Jerome Powell should acknowledge that the Fed is currently unable to bring about a calculated and systematic reduction in the price level. Unpopular as it may be, he may have to acknowledge that the tide of inflation will ebb and flow after the surge in government spending that began during the pandemic distorted the money supply. It seems clearer by the day that as long as Congress and the President continue to spend significantly more than the country receives, they will fan the flames of inflation and make Chairman Powell’s job very difficult at best. is.

Lacking royal powers with other policy interests, Mr. Powell can only hope that Mr. Biden follows Mr. Knut’s lead. But Biden appears to be doing the opposite. Apparently Biden believes he can control the tide, adding to his previous efforts to gut the world’s economic power and drive down prices by launching a “strike force against unfair and illegal pricing.” I launched it.

But while Biden moved his throne closer to the ocean’s edge, he raised consumer prices by imposing high tariffs on imported steel and autos. He has been marching with UAW workers demanding higher wages that tend to drive up prices. And he was willing to cancel more than $7 billion in student loans, a burden he claimed limited former students’ ability to buy homes and other consumer goods. As this capacity increases, prices will tend to rise as well.

As Mr. Powell watches and undoubtedly hopes for a beneficial outcome, Mr. Biden sits on a metaphorical throne, waiting for the surging waves of inflation to do his bidding. Meanwhile, almost countless staff members are rooting for him. When will Biden back away from the brink and take other measures to curb inflation?

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