Reply to Can someone explain to me why we have such high inflation now?

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[quote=Anonymous]Amazing how Americans don't understand basic econ. You thought all those stimmi checks, PPP loans, and other free give aways had no consequences?  The US gov have away multiple trillion dollar+ stimuli.  The Fed juiced the economy with zero percent interest rates, doubled the supply of money in only 2 years, and expanded the balance sheet to $9 trillion dollars (it was only $800B around 2008).  When you have that much cash and credit liquidity in the system you get persistent inflation.  How in the hell do American consumers STILL have a voracious appetite for vacations, cars, electronics, dining out, etc. even though prices are skyrocketing?  It's because people have too much money. The stamina for price hikes that Americans have is absurd.  It means inflation is sticky and very difficult to dislodge.

The latest CPI report tanked the markets. It was very bad.  It clearly shows inflation is being driven by excessive demand as well as an overly tight labor market and not so much due to supply constraints.  Yes, the labor market is too hot. Unemployment also needs to go back up to reduce the strangle the labor market has on inflation.

The fed is now raising interest rates and quantitative tightening to remove money and liquidity from the economy.  Costs to borrow are skyrocketing. It will bring down asset values, remove.miney from the system, and hopefully cause unemployment to go up. The net result will hopefully be taming of this terrible inflation.[/quote]

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