Editor’s note: This is the last in a two-part series featuring Carol Roth on the challenges faced by small businesses in the post-crisis period. She discusses the terrible decisions made by the Joe Biden administration and the Fed that contributed to spiraling inflation.
Who could have seen inflation coming? Common sense would dictate that injecting more than $4 trillion in fiscal stimulus in one year and a central bank pumping trillions more as part of monetary policy expansion efforts would lead to a consumer price index (CPI) reading of 8.5%. But how did the Swamp get it so wrong in the first place? Officials had access to the same data, economic theory, and latest developments in the world economy as everyone else. And yet, President Joe Biden and Federal Reserve Chair Jerome Powell seem blindsided by 40-year high price inflation. What happened? In an interview with Liberty Nation, Carol Roth, the author of The War on Small Business and well-known American television commentator, said it was a blend of arrogance and a paucity of public ridicule and accountability.
What Happened?
In 2020, Liberty Nation flashed the inflation alarm bells when the $2.2 trillion CARES Act was passed, as well as the central bank’s fourth round of quantitative easing (QE) was introduced. In the following months, all sorts of budgets and stimulus and relief packages were announced, leading to heightened concern for inflationary effects.
Roth had also been vocal about her inflation concerns, writing scores of opinion pieces and filling her Twitter timeline with warnings. “This particular situation was not because I am some sort of a genius. It was just incredibly obvious,” said Roth in an interview with Liberty Nation. “You cannot shut down large swaths of an economy, restrict supply, and throw dollars on top of that, and have the Fed print trillions of dollars.”
But if she saw it coming, then why did the Swamp get it horrifically wrong?
“My personal belief, it’s just my opinion, is that they knew exactly what they were doing,” Roth suggested. “Because there’s just no way people with that level of education would not be able to figure it out when people who were just going through their daily lives went, ‘Yeah, this obviously doesn’t make any sense.'”
Roth also called out the advocates of modern monetary theory (MMT), or. as she likes to call it, magic money tree. This idea consists of unlimited government spending without concern for surging debt and allowing the federal government to control the supply of money rather than the central bank.
Roth found it “appalling” when the administration and the Eccles Building evolved from no inflation to transitory inflation to the private-sector’s fault to “Putin’s price hike.”
“It has been everybody’s fault except for the people who enacted this policy,” she said. “We have no accountability. This is total moral hazard. And if we don’t stand up and demand accountability, the next time around is gonna be even worse.”
But can the Federal Reserve bail out the United States economy and cure the nation’s inflation woes? Probably not since “they’re so far behind the curve,” prognosticated Roth. She did not want to see the unprecedented and unlimited QE crusade the Fed embarked upon in the first wave of the pandemic. However, even if it were necessary, Roth would have preferred to witness some level of tightening by June 2020. But the world’s most powerful institution never did this. “They kept incredibly accommodated policy, and they enabled a historic for wealth from Main Street to Wall Street,” Roth said.
With the monetary policy tools that the Fed has in its possession, the chief challenge will be trying to curtail inflation while also supporting economic growth. In other words, the central bank runs the risk of either stagflation or recession and will be unable to achieve the objective of a soft landing. “The Federal Reserve is just such an epic disaster,” Roth averred.
(Photo by Anna Moneymaker/Getty Images)
So, what is her panacea for curbing inflation and generating economic growth? It might be simple enough if Biden and the Democrats wanted to foster an economic environment that is in opposition to their aims: become energy independent again, shrink the size and scope of government, scale back strict regulations, and make it easier for companies to hire workers. It is a simple, effective, and common-sense prescription, but common sense is not so common in the nation’s capital.
Heads or Tails?
Can anyone stop inflation at this point? From a policy perspective, it is highly unlikely. Even if the Federal Reserve were to become more aggressive, as the minutes from the March Federal Open Market Committee (FOMC) meeting unveiled, the real interest rate is still stuck in subzero territory, so any drop in inflation is likely to be minuscule. The White House insists that spending more will result in lower inflation, so US officials cannot be taken seriously. When it comes to external factors, the worldwide supply chain crisis is not improving, the Ukraine-Russia war is still intense, and global demand remains strong for everything while output and inventories are failing to keep up. In a quasi-tightening state, it is a game of heads or tails. Heads: a dip in the inflation rate. Tails: an economic downturn.
End of series.
