The U.S. Department of Labor’s latest report shows inflation raging, with consumer prices rising 7.0% in 2021. At that pace, prices will double in roughly a decade. In only a year, President Biden’s Federal Reserve (Fed) has presided over a four-fold increase in inflation. Despite price stability being the Fed’s duty, its Chairman, Jerome Powell, has been asleep at the switch, distracted by forays into left-wing fields.
Earlier in the year, Powell directed his attention away from the mounting inflationary crisis and instead decided to focus on “diversity.” Instead of acknowledging and confronting the monetary problem, inflation was brushed off as “transitory” while the Fed sought to appease far-left causes and spout political talking points.
As the disease of inflation infected more and more industries, the Fed was too busy lecturing the patient on diversity and couldn’t be bothered to administer the medicine it willfully withheld.
Powell’s latest political preoccupation is climate change. In his recent testimony before Congress, Powell obstinately made no admission of guilt for inflation’s dizzying rise, but instead turned his attention to topics beyond his purview.
Powell even said that climate policy will impact banks’ stress tests, which are supposed to indicate a financial institution’s ability to weather an economic downturn. What on earth does climate activism have to do with a bank’s financial health?
In an age of Orwellian newspeak, this likely means banks will only be deemed “healthy” by the Fed if they divest from any investments of which liberal activists do not approve. It is a regulatory runaround to financially hamstring America’s oil and gas industry (among others).
That is not a stress test but a political test. Once again, the Fed is engaged in pandering instead of doing its job — which it has done quite poorly.
Biden’s Fed has overseen staggering price increases in just a year. Used vehicle prices are up 37.3%, bacon 18.6%, gasoline 50.8%, uncooked beef and veal 23.2%, furniture 13.8%, and eggs 11.5%. Prices are rising so fast that they are outstripping workers’ gains in nominal wages.
Real average hourly earnings, which account for inflation, fell in 2021 by an astonishing 2.4%, despite nominal increases of 4.7% over that period. People are demonstrably worse off after the last year than they were at the end of 2020.
The first year of Biden’s Fed has been nothing short of a disaster.
From its ivory tower, the Fed can make proclamations on diversity, climate change and other “woke” talking points, but most Americans do not have that luxury. Families are instead absorbed in the task of figuring out where to trim an ever-tightening budget, trying to square the circle of maintaining a standard of living that’s no longer affordable.
At this point, the Fed has virtually dropped all pretense of being an independent institution, having instead taken up the mantle of Congress’ personal financing arm, as Modern Monetary Theory envisions. This has brought back the hidden tax of inflation with a vengeance not known by an entire generation of Americans. The last time inflation was running this hot was June of 1982.
And it did not take a crystal ball to see this coming. What did the Fed think would happen after it continued pumping out trillions of dollars into the economy? Even now, the Fed is still adding to its balance sheet, increasing the money supply and putting upward pressure on prices.
Biden’s Fed needs to get its act together — now. There is no lack of evidence that inflation is running amok. The only thing lacking is the will to ignore political pressure and pursue the right course of action.
Inflation has become such an obvious and dire problem that only a woke political servant could ignore it. As woke things go, it is to America’s detriment.
E.J. Antoni is an economist at Texas Public Policy Foundation and a visiting fellow at the Committee to Unleash Prosperity.