Biden’s inflation is bad right now, but things will only get worse unless this changes

Mohamed El-Erian, a financial expert and chief economic advisor at financial services firm Allianz, believes that inflation is not a temporary problem.

He argued that the Federal Reserve was incorrect in believing that inflation was transient.

“I think the Fed is losing credibility,” he said CNBC in Monday.

“I have argued that it is really important to re-establish a credible voice on inflation and this has huge institutional, political and social implications.”

Inflation has emerged as a haunting ghost Biden Presidency.

On November 10, Bureau of Labor Statistics reported that inflation rose 6.2% over the past 12 months, the highest increase in more than 30 years.

Higher inflation has a range of harmful effects, including ultimately higher interest rates, lower exports, lower savings and misinvestment, among others.

While hyperinflation of the kind seen in Germany’s Weimar Republic may still be a long way off, inflation nonetheless carries the risk of causing significant economic damage.

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“We have a lot of evidence that there are behavioral changes taking place. Companies are charging higher prices [and] El-Erian argued.

“The supply disruption will last much longer than people anticipate. Consumers are making purchases to avoid impending problems. That of course puts pressure on inflation. And then the wage behavior is changing. “

El-Erian believes that the best response the Federal Reserve can make to the inflation threat is to speed up the tapering of Federal Reserve bond purchases.

Currently, the Fed is buying $120 billion in bonds every month.

Energy Energy prices are a key input of everything produced in the economy, and according to the BLS report, energy prices have increased by 30% in the past year.

The risk of inflation threatens the Biden administration, and while inflation affects those at the bottom of the economic scale most, it could contribute to further economic inequality.

Ludwig von Mises, a famous economist at one time speak: “Just as the sound monetary policy of the gold standard advocates goes hand in hand with liberalism, free trade, capitalism, and pacifism, so is inflationism a part of democracy. imperialism, militarism, protectionism, statistics and socialism”.

It’s time for the Federal Reserve to act and cut down on dangerous bond purchases before inflation worsens.

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