Manawatu Standard

Is Biden on wrong side of inflation bet?


Let it be said: inflation is a real risk. The latest evidence arrived last week when the federal government reported that the consumer price index rose 5.4 per cent in June from the same month last year, the biggest jump since 2008.

Any shopper or employer can attest to the realworld impacts. Food is more expensive. Cars are pricier. Labour shortages are rampant. And, after a year on pandemic lockdown, many Americans are spending like there is no tomorrow.

So what’s the problem with an economy that clearly is bouncing back? We point to the concerns of economists who warn that government spending and monetary policy risk unleashing inflation.

Economist Larry Summers, a former Clinton and Obama adviser, earlier this year warned that policymake­rs are ‘‘rather overdoing it’’, adding that the assumption ‘‘this is all something that can easily be managed is misplaced’’.

For now, there isn’t enough data to conclude that inflation is taking on a pernicious life of its own. Nonetheles­s, we are reminded of the fable of the frog put in water that is then brought slowly to a boil. The frog succumbs because it did not perceive the danger when it had an opportunit­y to escape. This much is certain, however. It is safer to control an economy that isn’t dangerousl­y revving on the red line.

 ??  ??

Newspapers in English

Newspapers from New Zealand