Inflation and Prices

At The New Yorker, 11 Feb 2023, "Does the President Have Control Over Inflation?":

On Tuesday night, President Biden used his State of the Union address, in Congress, to touch on a range of pressing issues, including infrastructure, insulin prices, Roe v. Wade, Chinese surveillance, and the war in Ukraine. But he chose, early on, to address one topic that Americans feel especially strongly about. “Here at home, inflation is coming down,” Biden said, to waves of applause. “Gas prices are coming down. Food prices are coming down.” He added, “Inflation has fallen every month for the last six months.”

I shouldn't say, because Biden's quotes are taken out of context. But it looks like President Biden does not know what inflation is: He says inflation is coming down. Then he gives two examples of prices coming down. Then he says again that inflation is coming down. The way the paragraph presents Biden's words, "inflation" and "prices" are interchangeable terms.

Maybe it is Biden who misunderstands the terminology. But three separate quotes from Biden are joined up in that paragraph, so maybe it is the author of the New Yorker article that misunderstands the terminology. Or maybe the author just dumbed things down for the rest of us. Dunno. But here's the thing: If prices are going up, that's inflation. If inflation is going up, that means prices are going up faster than before. And if inflation is coming down, prices are still going up.

Inflation coming down is not the same as prices coming down. Inflation means prices are going up. The prices can go up faster (if inflation goes up) or they can go up slower (if inflation comes down), but either way the prices are going up.

Oh, and at the Federal Reserve they talk a lot about "stable inflation". That sounds like stable prices, but it is not the same. Stable inflation means prices are going up at about the same rate (maybe 2 percent every year) every time you check. But stable prices means prices are NOT going up, and inflation is ZERO.

Many problems...

There are many problems in our world today. Most people -- people who present the news, for example, and people who receive the news -- most of them seem to think the problems are political.

I think the problems are economic. So I googled the economic problem. You can probably guess what the search turned up: Scarcity.

Almost everything Google turned up was a restatement of what Lionel Robbins said about scarcity, something he said in 1932, before there was such a thing as macroeconomics.

I asked about the economic problem because I think there is one central, overriding problem, one root problem from which our many problems grow. 

Google answered: Scarcity.

It reminded me of "the motto of Mr. Crockett's company: Many problems, one solution." But the central problem of our time is not scarcity. It is excessive private-sector debt. 

The one solution is to reduce that debt.

Trump created the Biden inflation

Recently we looked at this graph. I like the colors, so I'm showing it again:

Graph #1: Blue is the interest rate. Tan is inflation. Brown is blue behind tan.

The purpose of the graph is to compare inflation to the interest rate, because the interest rate is the tool used by the Federal Reserve to control inflation. Inflation increased for a whole year with the interest rate at zero, before the Fed raised the interest rate. 

The graph only shows a few years. It would be difficult to see what the graph shows, if it showed a lot of years. But I can show it a different way: I can subtract the blue data from the tan. I can subtract the interest rate from the rate of inflation. This way we get only one line on the graph, a line that shows how much the rate of inflation is above (or below) the interest rate. This graph:

Graph #2: The Rate of Inflation less the resistance provided by the Interest Rate

The graph is a hobbyist's version of the Federal Reserve "reaction function": It shows how hard the interest rate is pushing down on inflation.

The tallest spike on the graph, on the right, after the year 2020, shows the so-called Biden inflation. It shows that the rate of interest (which was then zero) did not push inflation down at all. The graph shows how very unusual policy was in response to that inflation. Policy was never more lenient. No spike ever went so high.

The early years on the graph, until 1980, show rapid increase at every recession. The biggest (highest and widest) of these spikes comes late in the 1974 recession. But even that spike is small, compared to the Biden spike.

After 1980 on the graph the plotted line goes low, because the interest rate went very high due to the policies of Paul Volcker. It takes a long time for the line to come back up to the zero level. This shows a long period when the interest rate was significantly more than the rate of inflation.

When we get to the Great Recession of 2008-09, interest rates drop to zero, so even 2 percent inflation puts the plotted line above the zero level.

Recovery from the Great Recession was lengthy and slow. Late in 2015 the Fed at last had enough confidence in the economy to start bringing the interest rate up from zero to something closer to normal. Then in 2020 the coronavirus hit, and the Fed dropped the interest rate back to zero.

A year later, in March 2021, Fed Chairman Jerome Powell warned that we would be getting some inflation, some "transitory" inflation he said. That same month, inflation started climbing. 

Interest rates remained at zero for a year after Powell's warning.

The interest rate started going up in March 2022. The tall spike on the graph peaked in March 2022, and started to come down as interest rates went up. Not a coincidence.

Interest rates at zero offer no resistance to inflation. As the first graph shows, when the Fed finally started raising the interest rate in March, inflation peaked three months later, in June. By July inflation was coming down. It was not difficult to stop the rise of inflation. There was no lengthy process involved. 

There was a whole year when the Fed chose to do nothing instead of raising the interest rate. So inflation went up and up. And then, because inflation went up so high, it took a year to come back down. But when they finally did decide to raise the interest rate, there was no difficulty getting inflation to go down instead of up.

So the question is: Why did the Fed refuse to raise the interest rate for a whole year? I blame Trump. This wasn't Biden's doing. It was election interference by Donald Trump. 

By the way, Biden supports Federal Reserve independence. Trump doesn't. Trump wants to stick his finger in there to make things go his way. I think he already did. I think Trump created the Biden inflation.

A Nixon Chronology

In "How Richard Nixon Pressured Arthur Burns: Evidence from the Nixon Tapes", Burton A. Abrams writes:

In Nixon’s 1962 (p. 309-310) book, Six Crises, he recounts that Arthur Burns called on him in March 1960 to warn him that the economy was likely to dip before the November election. Nixon writes that Burns “urged strongly that everything possible be done to avert this development. He urgently recommended that two steps be taken immediately: by loosening up on credit and, where justifiable, by increasing spending for national security.”

The idea was to improve the economy enough that Vice President Nixon would win the election and take his turn as President when Eisenhower's second term was up. But no steps were taken, and Nixon ultimately lost to John F. Kennedy. Abrams writes:

But when then-Vice President Nixon took this recommendation to the Eisenhower Cabinet, “there was strong sentiment against using the spending and credit powers of the Federal Government to affect the economy, unless and until conditions clearly indicated a major recession in prospect.”

This excerpt ends as they all should, with economic policy actions reserved for economic rather than political purposes. But then, this one wasn't Nixon's decision.

From the National Review article "(More) Politics At The Fed?", dated April 28, 2004, which Wikipedia's "Arthur F. Burns" article attributes (in footnote 13) to Bruce Bartlett:

Richard Nixon was acutely aware that Fed tightening in late 1959 brought on a recession that began in April 1960. As the nominee of the incumbent party, Nixon took the blame for slow growth. In his book Six Crises, he complained bitterly that the Fed had, in effect, thrown the election to John F. Kennedy, whose most potent campaign pledge was that he would get the economy moving again.

From the "Federal Reserve Chairman" section of Wikipedia's article on Arthur Burns:

Nixon later blamed his defeat in 1960 in part on Fed policy and the resulting tight credit conditions and slow growth.

The purpose of economic policy, in Nixon's view, was not to promote the general welfare, but to make things better for Nixon.

From Politico, 10 October 2020: "The Time Nixon’s Cronies Tried to Overturn a Presidential Election"

[Nixon's] top aides and the Republican Party, almost certainly with Nixon’s backing, waged a campaign to cast doubt on the outcome of the election, launching challenges to Kennedy’s victories in 11 states."

It didn't work, that time.

From "Nixonomics: How the Game Plan Went Wrong" by Rowland Evans, Jr. and Robert D. Novak, in Atlantic Monthly, July 1971:

During that difficult decade after his defeat in 1960, aides and close friends had heard Nixon say privately time after time that had President Eisenhower only taken his and Arthur Burns's advice early in 1960 and moved rapidly toward stimulating the economy, he -- not Jack Kennedy -- would have been elected President. The implication, not quite stated flatly, was that Richard Nixon, if he had the power, would never again go into a presidential election with the economy in a state of deflation.

From The Chennault Affair  at The LBJ Presidential Library

Fifty years ago this year, on Oct. 31, 1968, President Lyndon B. Johnson announced a halt to the bombing of North Vietnam in hopes of encouraging peace talks to end the Vietnam War. At the time, Johnson knew a secret. Some in the Nixon campaign were secretly communicating with the South Vietnamese Government in an effort to delay the opening of the peace talks. They offered the prospect of a better deal for South Vietnam if Nixon became president...

When he learned of the back-channel communications, President Johnson called the effort "treason."

From “This Is Treason” at The LBJ Telephone Tapes:

Three days before the 1968 presidential election, President Johnson contacted Senate Minority Leader Everett M. Dirksen [R–Illinois] to inform him that the White House had received hard evidence from the Federal Bureau of Investigation that the campaign of Republican presidential candidate Richard M. “Dick” Nixon was interfering with Johnson’s efforts to start peace talks to end the Vietnam War. In this call, Johnson referred to contacts between Nixon’s campaign and South Vietnamese president Nguyễn Văn Thiệu that urged Thiệu to thwart any such negotiations.

From the National Review:

When Nixon became president in 1968, he vowed that he would not let the Fed do it to him again. At his earliest opportunity, he appointed a trusted aide, Arthur Burns, to the chairmanship of the Federal Reserve. His job was to make sure that money and credit stayed easy through the 1972 election.

As Wikipedia has it:

After finally winning the presidential election of 1968, Nixon named Burns to the Fed Chair in 1970 with instructions to ensure easy access to credit when Nixon was running for reelection in 1972.

Later, when Burns resisted, negative press about him was planted in newspapers and, under the threat of legislation to dilute the Fed's influence, Burns and other Governors succumbed.

Abrams writes:

Evidence from the Nixon tapes, recently made available to researchers, clearly reveals that President Nixon pressured Burns, both directly and indirectly through Office of Management and Budget Director George Shultz, to engage in expansionary monetary policies prior to the 1972 election.

And then there was the election interference called "Watergate", with Nixon's people breaking into Democratic headquarters and getting caught in the act. I refer to the "Smoking Gun" tape section of Wikipedia's Nixon White House Tapes article:

Nixon announced his resignation on the evening of Thursday, August 8, 1974, effective as of noon the next day.

 

Finally, from "Trump and Nixon were pen pals in the ‘80s. Here are their letters" at Politico:

The last letter in the Trump-Nixon series is dated Jan. 26, 1993. Trump writes to Nixon not long after his 80th birthday to thank him for a birthday photo and says, “You are a great man, and I have had and always will have the utmost respect and admiration for you. I am proud to know you.”

Birds of a feather.

What if Trump really did create the Biden inflation?

If you were convinced that Trump had created the Biden inflation, what would you think? Was it worth it?

Trump would say of course it was worth it, because it made people angry and unlikely to vote for Biden.

But what about the Trump supporters? Was it "worth it" to them, to do this to Biden? I think most of them would say No, not worth it. 

Their lives changed. Like the rest of us, now they worry about having enough money to eat every day and pay the rent.

You don't do that to the economy. You don't create 9 percent inflation just so the other guy will lose the election. And you don't do that to people, whether they vote or not.

If Trump did delay the rise of interest rates and did really create the Biden inflation -- and if people knew of it -- Trump lovers and Trump haters would be on the same side, and Trump would lose the election. It would be a landslide loss.

If we don't find out about it and Trump wins the election, that doesn't make it okay.

Blue is the interest rate. Tan is inflation.

Inflation went above the 2 percent target early in 2021. The Federal Reserve waited a year before raising interest rates.

Graph #1: Blue is the interest rate. Tan is inflation. Brown is blue behind tan.

Why the year-long delay? Clearly, inflation continued to grow worse until they raised the interest rate. Clearly, inflation started to go down soon after the interest rate started to go up. Why the delay?

Was it election interference by Donald Trump?

Profits doubled since the pandemic

Graph #1: Nonfinancial Corporate Profits, Q1 2012 thru Q1 2024

Chairman Smith, second try

I got distracted yesterday and ended up at my favorite topic -- misunderstanding the economy. I'm back now, trying to focus on Chairman Jason Smith's statement on the Biden inflation. I have to begin by restating something I said, wow, almost a month ago now.

On the graph below, blue shows "Headline" CPI inflation and red shows "Core" CPI inflation. The two follow roughly the same path, but the blue line shows a lot more up-and-down motion than the red line does. The blue line, in other words, is more volatile.

Headline and Core inflation have their differences. But often when Headline inflation is rising, Core is rising also. And often when Headline is falling, so is Core. Sometimes the two follow the same path, but blue is much more jiggy than red. The jigginess is volatility. And then sometimes, Headline inflation shows a substantial drop or substantial increase, or both in turn, while Core makes nothing but small steps. Again, there is less volatility in Core than in Headline.

The red line is less "jiggy" because Core PCE is less "volatile". Core PCE is less volatile because they leave out the most volatile data -- food and energy. The stats people want to take some of the noise out of the numbers -- or at least that's what I would want to do -- so they omit that volatile data.

Graph #1:  Headline (blue) and Core (red) CPI Inflation since 1980

Before I made the graph and actually looked at it, I thought that Core PCE understated inflation. It does not. It understates changes in inflation. Usually, with Core PCE, the highs are less high and the lows are less low. Usually, but not infallibly, Core PCE smooths out the data. It's all there on the graph. All I had to do was look.

When inflation is in the news, it is because inflation is increasing. When inflation goes high, if we compare Core inflation to Headline on a graph, Core will often appear to understate the inflation, because the highs of Core inflation are less high than those of Headline inflation.

When inflation goes low, Headline inflation (the more volatile one) goes down rapidly. Core inflation (the less volatile one) goes down more slowly. At such times, Core inflation appears to overstate the inflation, because it understates the decline. 

As a rule, Core inflation understates the changes. The highs are less high, and the lows are less low.

//

Chairman Smith's statement ends with half a dozen bullet points under the heading "Key Background". The last of these bullet points is

• Inflation has become so deeply ingrained in the economy that when removing food and energy this month’s core inflation number of 5.3 percent is even higher than the topline figure.

I want to restate that, for clarity:

This month’s core inflation number of 5.3 percent is even higher than the headline number.

I am left with several considerations:

1. Smith mentions "removing food and energy" from the inflation data. This removal is done by the people who provide the stats. Food and energy prices are seen as more "volatile" that other prices. Removing these more volatile prices from the calculation leaves the less volatile "Core" data that the Chairman mentions. So the jiggies of Core inflation are smaller than the jiggies of Headline inflation.

2. I figure what Smith calls a "topline" number is the one that I've seen called the "headline" number. "Topline" sounds like a decent synonym. To avoid confusion, I prefer not to use synonyms. Except, of course, "jiggies" for "volatile".

3. I don't know what the Chairman means by "deeply ingrained" inflation. I suppose he means that inflation expectations are no longer anchored at 2 percent (as Jerome Powell might put it) and that people expect higher inflation. I don't know if the statement is true or not (and I won't guess), but it is how I interpret Chairman Smith's words.

4. Smith's statement doesn't say whether he's looking at PCE inflation or CPI. But the statement is dated 15 June 2023. By that date the May data was probably available for the Chairman's use. A FRED search for headline inflation turns up 6 datasets, including Core PCE and Core CPI:

• Core PCE (FRED PCEPILFE) for May 2023 is given as 4.68783 percent. That rounds to 4.7 percent, which does not match Smith's 5.3 percent.
• Core CPI (FRED CPILFESL) for May 2023 is given as 5.33225 percent, or 5.3 percent when rounded. This is the data Chairman Smith was looking at.

5. Smith says Core CPI was "even higher than" Headline CPI for May, 2023. Headline CPI (FRED CPIAUCSL) for that month was 4.12069 percent, which rounds to 4.1 percent. Core CPI for that month, at 5.3 percent, was certainly higher than Headline CPI. Chairman Smith is right about this. And I get a Milk-Bone for my painstaking effort here. 

You can have half, for reading these tedious notes.

//

Now that I know what Chairman Smith is saying, and the data he used, I can evaluate what he said. As I read him, he says

Inflation has become so deeply ingrained in the economy that the core inflation number is even higher than the headline figure.

His statement strongly suggests that in his view Core inflation is almost never higher than Headline inflation. That's what I used to think. As I said above: Before I made the graph and actually looked at it, I thought Core PCE understated inflation. If Core understated inflation, it would be unusual for Core to be higher than Headline. But Core doesn't understate inflation. It understates changes in inflation. 

It is not unusual for Core inflation to go below Headline. Core is below Headline when it understates rising inflation. 

It is not unusual for Core inflation to go above Headline. Core is above Headline when it understates falling inflation. It's all right there on the graph.

It is likely that we are most concerned about inflation when inflation is rising. So it is probably true that usually, when we look at inflation on a graph, we see Core understating the increase. But if we should look at a spot on the graph where inflation is falling, or falling rapidly, we would very likely see Core inflation understating the decline. We would very likely see Core inflation higher than Headline inflation because Core understates the decline.

I got the Excel data for Graph #1 above, and subtracted the Headline values from the Core values. I put the results on a bar graph. When Core is greater than Headline, the result is above zero. When Core is less than Headline, the result is below zero:

Graph #2: Core CPI is Greater than Headline CPI when the bars are Above Zero

This graph shows 534 months of data, from January 1980 to June 2024. 295 of those months are above zero (Core is greater than Headline). 239 of those months are below zero (Core is less than Headline). For this sample, Core inflation is more often above Headline inflation than below it. It happens during disinflation, when the rate of inflation is falling. Core goes above Headline when it understates falling inflation. It happens often.

I only figured this out a month ago. But I'm a hobbyist, studying the economy for my own satisfaction. It troubles me that Chairman Jason Smith of the House Ways and Means Committee doesn't know it.

On Graph #2, most of the 1980s show the blue bars above zero, meaning Core inflation was higher than Headline inflation. This was during the Volcker disinflation. Headline inflation came down rapidly. Core understated that decline every month from July 1981 to July 1987.

And again, every month from March 2023 to end-of-data show the blue bars above zero, meaning Core inflation was understating the decline of Headline CPI. I guess we'll have to call this the Biden disinflation.

Core inflation understates changes in Headline inflation. It's a pretty good rule. I just wish the Chairman of the House Ways and Means Committee understood it.

//

The Core inflation Smith mentions for May 2023 was higher than the Headline number. Chairman Smith seemed to think this most unusual. But it is often true that Core inflation is higher than Headline inflation.

Looking at the May 2023 data, Chairman Smith said Core inflation was higher than Headline inflation because inflation "has become so deeply ingrained" in us. Maybe he meant we expect inflation to be higher than 2 percent. Or maybe he just meant we expect inflation, always.

We do expect inflation, always, because we always have inflation. Granted, we don't always have 9 percent inflation. Usually it is much lower. But almost always, we have inflation.

Core inflation was higher than Headline in May 2023 -- in fact, higher in every month from March 2023 to the most recent data, June 2024 -- but not because inflation is "deeply ingrained". Core inflation has been running higher than Headline inflation because Headline inflation has been coming down. Headline inflation has been coming down, and Core has been understating that change. So Core inflation  has been higher than Headline inflation. It is not unusual, and it is not because inflation is "so deeply ingrained."

This is the Biden disinflation, remember. Inflation is coming down. and Core understates that change. So Core inflation has been running higher than Headline inflation. Just like the Volcker disinflation.

Chairman Smith

I'm looking at this article, dated 15 June 2023: "Chairman Smith: Biden’s Failed Economic Policies Forcing Fed to Choose Between Chronic Inflation or Risk of Recession"

Chairman Smith is Jason Smith, Chair of the House Ways and Means Committee. The Committee "shapes fiscal legislation". Here are the opening sentences of the article:

WASHINGTON, D.C. – Despite prices continuing to rise and inflation having increased 15.5 percent since President Biden took office, the Federal Reserve has been backed into a corner by the Biden Administration’s failed economic policies and forced to choose between pausing interest rate hikes or moving forward with another increase, which would further squeeze our weakened economy and risk recession.

Chairman Smith released the following statement in response to the Federal Reserve’s decision to pause interest rate hikes:

“President Biden’s reckless actions have put the Federal Reserve between a rock and hard place. The Fed is having to choose between hiking interest rates to combat the inflation crisis caused by reckless Democrat spending, risking the health of our overall economy, or pausing those rate hikes and hoping prices do not continue to spiral out of control...

That last paragraph pretty well describes what people seem to feel about the inflation of recent years: caused by reckless Democrat spending. Even Democrats feel that way, if we judge by the way the Dems on TV have failed to offer an equally strong alternative cause of what is commonly called "the Biden inflation".

I want to point out that Chairman Smith's phrase "caused by reckless Democrat spending" is an assumption. It seems strong because people accept that explanation. But the Chairman sticks the phrase into that sentence with no examination of relevant facts.

I want to point out also that failing to examine the relevant facts very often leads to misunderstanding the cause of the problem being examined. And misunderstanding the cause of the problem very often leads to solutions that do not work. 

Federal deficits are a case in point. Everyone thinks the federal deficits are caused by excessive government spending, and that this spending and those deficits are the reason our economy is in such bad shape. But federal spending and deficits are the result of our long economic decline, not the cause of it.

We have been struggling to overcome the federal deficits now for 50 years or more, with very little success. The reason for our lack of success is that we misunderstand the problem. It is not federal debt that slows the economy, but excessive private debt. Yet not once in 50 years have we tried to reduce private debt. Oh, sure, Biden has tried to forgive student debt, while Congress and the Court have undermined his efforts. But Biden's efforts address such a small part of private debt that even if he succeeded there would be no noticeable improvement in our economy. Anyway, Biden's plan for debt forgiveness is offered as a way to help people out, not as a way to improve the economy by reducing excessive private debt. Biden misses the point entirely.

Biden's plan for debt forgiveness is a way to help people cope with a bad economy. It isn't a plan to fix the economy. This tells me that Biden and his advisers misunderstand the economic problem. They fail to see that it is not government debt, but private debt that holds our economy down.

It was the same with Bill Clinton. Clinton spent the 1990s reducing federal deficits and finally, it is said, balanced the budget. Household debt picked up the slack, increasing more rapidly in the 1990s than before, and more rapidly yet in the 2000s -- until the 2008 financial crisis brought that all to a sudden halt.

That sudden halt was evidence of misunderstanding.

Before we decide to blame Democrats in general, along with Biden and Clinton, let us pause to remember that Bill Clinton and Newt Gingrich worked together to come up with the plan to balance the federal budget. The Democrats, under Clinton, adopted the Republican strategy. Unfortunately, the Republican strategy is based on a misunderstanding of the economic problem.

Democrats don't have a clue about the economy. Democratic policy is always and everywhere a way to help people cope with a bad economy. Coping is not the same as fixing.

Republicans do have a clue about the economy. They seem to want to return to the policies of the 1800s. Unfortunately, those policies no longer work. The economy changes. The economy evolves. Economic thought must evolve with it, or it is Fall-of-Rome for us.

This little piggy has bad policy.
That little piggy has none.

On measuring inflation

From CNBC, 28 June 2024:

The Fed focuses on the PCE inflation reading as opposed to the more widely followed consumer price index from the Labor Department’s Bureau of Labor Statistics. PCE is a broader inflation measure and accounts for changes in consumer behavior, such as substituting their purchases when prices rise.

While the central bank officially follows headline PCE, officials generally stress the core reading as a better gauge of longer-term inflation trends.

So now I know: Headline PCE is "preferred" but Core PCE is "better".

The CPI runs higher than the PCE measures, and the Fed doesn't like it at all.

That part about the PCE measures accounting for changes in consumer behavior, well isn't that special. It means when prices get so high that we can no longer afford to buy meat, they take meat out of the inflation calculation. This is the preferred way to keep inflation down.

Well, at least the irony is good.

An alternative to will-he-or-won't-he

I am so tired of Democrats in the news, wasting their days bickering about whether Biden should stay in or get out of the November election. It would be far more productive to directly attack Donald Trump.

Trump created the Biden inflation, just as Nixon created the early-1970s inflation, by convincing enough of the voting members of the FOMC to delay raising interest rates. Call it election interference.

Asked if he created the Biden inflation, Trump would of course deny it. But Trump lies. He lies all the time. And he lies to make himself look good. So I have no choice but to believe that the truth would make Trump look bad.

It was never Biden's inflation

 

"... the federal funds rate had never been so low with inflation so high at a point when the Fed began increasing rates."

Economic Brief No. 23-26, Federal Reserve Bank of Richmond

The Biden inflation was created by Donald Trump. All Trump had to do was delay the increase of interest rates after Jerome Powell's March 2021 warning that inflation was coming. 

I don't know how Trump did it, but I know he did it. Rates did not increase for a year after Powell's warning.

15 March 2020: Covid is in the air. The Federal Reserve ("the Fed") lowers the interest rate to zero.

4 March 2021: Fed Chairman Jerome Powell starts the clock. At the WSJ Jobs Summit, Powell said:

So right now inflation is running below 2%, and it's done so since the pandemic arrived. We do expect that as the economy reopens, and hopefully picks up, we will see inflation move up...

17 March 2021: At the press conference, Powell said pretty much the same:

Over the next few months, 12-month measures of inflation will move up... as the very low readings from March and April of last year fall out of the calculation. Beyond these base effects, we could also see upward pressure on prices if spending rebounds quickly as the economy continues to reopen, particularly if supply bottlenecks limit how quickly production can respond in the near term... The median inflation projection of FOMC participants is 2.4 percent this year and declines to 2 percent next year...

 15 April 2021: The Bureau of Labor Statistics reported:

Consumer prices increase 2.6 percent for the 12 months ending March 2021

Already in March of 2021, when Powell said he expected 2.4% inflation, he got more than expected. And all the rest of the inflation we've had since then has been above the 2.6% number.

March 2022: One year after Powell's inflation warning, the Fed begins raising the interest rate. They were a year too late. The interest rate was at zero. Low rates encourage inflation, and you can't go lower than zero. The one-year delay before raising rates was a highly effective way to create inflation and turn voters against Joe Biden.

June 2022: Just three months after the Fed finally began raising interest rates, inflation peaked. It took very little effort to break inflation's upward momentum. That's why I say printing money was not the direct cause of this inflation. The delay in raising interest rates was the cause.

It took a year for inflation to fall from 9 percent to 3 percent. Since June 2023 inflation has been stable at around 3.3 percent. In sum, it is now three years and four months since Jerome Powell warned us of inflation. It is two years and four months since the Fed decided to do something to fight the inflation. The one-year delay was a very effective strategy for turning voters against Joe Biden.

"Attack. Attack. Attack," wrote the New York Times. "Delay. Delay. Delay. Those two tactics have been at the center of Donald J. Trump’s favored strategy in court cases for much of his adult life..."

It worked with monetary policy, too: Attack and delay. Trump created the Biden inflation.

Download and share my 12-page PDF: "The Plan, Parts 1 and 2"