Don’t Buy Into the Inflation Scare | Robert Reich

We definitely should not be worried about inflation. That is a bogeyman that’s being used by conservatives and corporations, who don’t want the government to spend money, who are worried about their taxes possibly going up. Don’t worry about inflation. You have a lot of things to worry about. You can worry about climate change, that jobs are not paying enough.

You can worry about the fact that corporations are raking in more and more profit. Billionaires are doing better than ever. “We’ve been to space!” Let’s be realistic here. There are a lot of problems we have, but inflation is not among them.

Inflation is a general increase in prices. The real danger is that if prices start going up, everything costs more, people get poorer. They’ve got to get wage increases in order to keep up with price increases. In the worst of all worlds, those wage increases generate even more price increases, and you get into kind of expectations of further price increases, so the whole thing perpetuates itself into a kind of crisis. And we’ve seen that.

In the United States in the 1970s, we had double digit inflation. We’re hearing about inflation again because the government is spending a lot of money and interest rates are very low.

The inflation that we are now experiencing has nothing to do with the old, serious, dangerous price inflation, in terms of getting us out of the current recession, getting the economy back on track, getting more people employed. Much of the inflation in terms of things like lumber or semiconductors, all of this has to do with supply bottlenecks. When you go into a pandemic recession, everything shuts down.

Don’t Buy Into the Inflation Scare | Robert Reich

So to start getting things going again takes time.

Supply has to catch up with demand. Until it does, there are going to be fluctuations in prices, and some prices are gonna stay very high. Oil prices, gas prices are subject to some of that same force. The reason oil prices are going up is because supply is not quite there.

OPEC, the Organization of Petroleum Exporting Countries, they haven’t gotten their act together. In the United States, we have some supply bottlenecks, but these are not permanent problems.

These are just start-up problems. There’s a huge amount of underutilized capacity in the country. We are still down seven million jobs from what we were in January 2020.

It’s very easy for companies to go abroad, to extend their capacity, to outsource. And that’s what they’ve been doing. So there are almost no inflationary threats and labor unions are very small as a proportion of the workforce these days. So, you don’t even have wage price inflation pressures growing. You have a lot of things to worry about, but inflation is not among them.


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