Nothing Is More Political Than Inflation

Nothing Is More Political Than Inflation

Towards the end of "Bad Optics," I spoke briefly about the political ramifications of persistently high inflation. When Joe Biden renominated Jerome Powell last month, some saw the decision as an implicit green light for the Fed to execute a hawkish pivot. There was plenty of boilerplate commentary about Powell being the "continuity" choice, but that was a red herring. Both Powell and Lael Brainard were continuity candidates. (It's not exactly as if Brainard is an anti-establishment dark-horse.
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3 thoughts on “Nothing Is More Political Than Inflation

    1. Indeed! Back in my undergraduate days (mid-60s) I attended a classic liberal arts college and to graduate with honors I had to write a thesis. I was an econ major so I wrote about the means for optimizing total value in the economic system by adopting cost-benefit analysis in the government sector. One of my three advisors on the project was a political science prof who rightfully pointed out that economists who thought about stuff like this were full of it because they failed to consider the politics of economic decisions, as I had in my paper. Strong lesson that still applies. Remember, back in the days of John Stuart Mill the field was called “Political Economy.”

  1. It is really not funny to watch everyone twist. The Fed and Federal governmentnt were successful in preventing a depression in 2020. Now at the end of 2021 we are dealing with the side effects of the emergency surgery. It is not hard to figure out what to do- marginally withdraw monetary support. That is what is happening. If inflation persists the Fed will raise rates. As one former central banker I saw stated in an interview, monetary policy is iterative. What would the peanut gallery suggest the Fed or US Treasury advocate back then? Stand aside and watch a depression unfold? (1929-32). Inadequate stimulus (2008-12) thanks Larry Summers et al? You cannot have perfection but I will take what policy makers decided to do in 2020-21.

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