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Financial News: Inflation, not Covid, is the problem

Financial News:

Inflation, not Covid, is the problem

Inflation and Joe Biden

In 2022, Covid will not be the world's top public enemy. Inflation and the likelihood that policymakers dismiss the post-Covid rebound will be the major threats this year.

For most of 2021, policymakers at the Federal Reserve and many other central banks were confident in dismissing labor shortages and supply-chain bottlenecks as pandemic side effects. Lingering fear of Covid and those extra federal dollars in bank accounts were discouraging many of the unemployed from returning to work. The central banks reasoned that given enough time, these difficulties would be resolved.

President Biden and his White House have not solved either issue.

The pandemic may have permanently altered the way we work and shop, but after the virus has been eradicated, the basic dynamics of demand and supply will swiftly return to normal. Then inflation will begin to return to the Federal Reserve's long-term target of 2%. If they're correct, officials will have avoided a recession by guiding the US economy to a smooth landing. If they are wrong, we shall all pay the price in 2023.

Photo: Illustration of Joe Biden by Phil Foster.

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Content ID: 1641988745 Created Wednesday, January 12, 2022 11:59 AM UTC by Aaron Stipkovich, Updated Wednesday, January 12, 2022 4:21 PM UTC by Aaron Stipkovich.