Philip Cross: The government is driving inflation

philip cross the government is driving inflation

Sumary of Philip Cross: The government is driving inflation:

  • As a result, many central banks have been slow to react to the price rises.
  • The disruption to supply surprised the Bank of Canada, which in summer 2020 predicted “much of the initial decline in supply is likely to be relatively short-lived.
  • Bank of Canada Governor Tiff Macklem recently acknowledged price increases were more than temporary, partly because the Bank has downgraded its estimate of potential economic growth nearly a full point to 1.6 per cent.
  • The increases in incomes and savings show that much government aid was not needed, especially during the slow shift from economy-wide stimulus to targeting specific sectors.
  • Accelerating inflation underscores how economists have long struggled to understand price dynamics.
  • Higher inflation was unforeseen because, as former Fed Governor Daniel Tarullo observed, economists have no reliable theory of inflation.
  • Although “the money supply” must be broadly linked to prices, it has proved hard to define exactly what constitutes the money supply — though maybe right now it doesn’t matter that much: all standard measures have swelled since 2020. Story continues below This has not loaded yet, but your article continues below.
  • Very high unemployment in 2009 and 2020 should have resulted in persistent price deflation but did not: inflation only moderated briefly.

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