Right now there’s a big debate happening in economic circles about, is the economy overheating with all of this fiscal stimulus, are these higher inflation readings here to stay or not.
Followed by:
I don’t think they are here to stay because I believe we are going to bring women back into the labor force and workers who have been displaced, but if we fail to do that, then these high inflation readings would become a lot more concerning because then it would signal we are overheating the economy.
This is the exact phrasing Minneapolis Federal Reserve President Neel Kashkari said, according to Reuters. To Kashkari, the “big debate” happening in economic circles centers around an “economy overheating,” and how long prices of goods and services will continue to rise. In one sentence, the President illustrates numerous problems with the mainstream economic narrative.
For something so technical, mathematical, and statistical in nature, complex economic ideas are reduced to the vaguest of terms. The idea of an “overheating” economy due to fiscal stimulus attributes nothing to the Fed and its role in the money creation process. As for the notion of overheating, it requires some sort of arbitrary barometer, or other indicator allowing economists to know when an economy is “too hot” or “too cold.”
The question of higher (price) inflation readings and whether they are temporary continues to play out for the public while still making little sense. This idea of a transient period was hardly, if ever, mentioned even a few months ago. Now that it’s here, supposedly these price increases are okay, as the increases to follow won’t be as high. This negates the fact that prices are still rising, inflation compounds, and year over year life will continually become less affordable than the year previous.
In his second quote President Kashkari says price increases are not here to stay because women will soon re-enter the labor force…
He does not explicitly blame the lack of women in the labor force for an increase in prices, but presumably, once more women start working again, prices will decrease. Indirectly, this places a burden on women to help resolve rising prices.
In the two quotes above, Kashkari fails to mention central banking, the effects of the Fed or the money supply. The part about women going back to work offers little substance and seems contrived, rather than citing any economic theory or quantifiable data. Hence, he manages to say nothing of merit; yet he says a lot, namely that our central planners seem to be in the habit of making things up as they go.
He ends by claiming these high prices are indicative of an overheating economy. Whether it’s due to fiscal stimulus or the lack of women in the workforce, one thing is certain: any failure in the economy, and especially price increases, are caused by everyone else, except the Fed.
