Nicholas Antczak

Recent Views on Inflation

9 days ago

Since the onset of the Coronavirus pandemic, the Federal Reserve has had the unenviable task of infusing billions of dollars of aid into the economy, while limiting the inflation that comes with the introduction of large quantities of new money. 

            As Croushore points out in our text, periods of inflationary growth come with added risk to consumers and investors – as the rate of inflation grows, the value of your dollar decreases, as you are able to purchase less with each dollar (pg. 40).  In instances of high inflation, consumers typically look to spend their money quicker or keep it invested and earning interest (Croushore, pg. 40).  The concept of money as a “store of value,” and the future value of money comes into account when banks and consumers determine interests rates they want to offer on loans or receive on their investments, respectively.  If the rate of inflation outstrips the interest earned, the lender/saver end up losing money in the long run.  For this reason, the Federal Reserve and many financial institutions employ economists to help forecast and assess the state of the American economy (“Inflation Miss”). 

            A recent opinion piece from the Editorial Board of the Wall Street Journal pointed out how inaccurate the Federal Reserve Boards expected inflation rates have been, even when accounting for updated forecasts.  In December 2020, the Fed’s personal consumption expenditures (PCE) assumed inflation rate was 1.8% – by June 2021, they were expecting an increase of 3.4% on the year.  However, by May the index had already climbed 3.9%, meaning prices will need to have dropped for the last few months of the year to get to that 3.4% figure.  The consumer price index is even higher, with prices in June 2021 over 5% higher than the previous year (“Inflation Miss”).  Although the argument can be made that some of these increases are a result of extraordinary circumstances (the micro-chip shortage that has shuttered some American automotive manufacturers, for example), the “policy of near-zero interest rates and $120 billion a month in bond purchases” is contributing as well, in the eyes of the Journal’s Editorial Board. 

“The Federal Reserve’s Big Inflation Miss.”  The Wall Street Journal, Editorial Board, 28 July, 2021.  https://www.wsj.com/articles/federal-reserve-jerome-powell-inflation-forecast-miss-consumer-price-index-11627507973

Byron Gardner

Module 2 – Discussion – INTRODUCTION TO MONEY & BANKING

It is the Occupational Safety and Health Administration (OSHA) to the rescue of more than “80 Million UN-vaccinated employees who at least once a week must be tested, with the rules getting stricter for federal employees and federal contractors, having no option to choose regular testing instead” (Newman, Rick. 2021).

OSHA under the auspices of the Department of Labor plans to issue an emergency temporary standard implementing the new requirement as “President Biden unveiled a six-pronged strategy to combat the Delta variant of Covid-19 that ramps up vaccine requirements for employers with 100 or more workers, those in the medical field and federal workers and contractors” (Armour, S. and Siddiqui, S. 2021)

The larger question is, how will this impact the economy and the banking sector? Economist, like us have weighed in and declared “Continuing on the current course, with no change, would risk prolonging an economic slowdown that has already begun, with economists cutting growth estimates for the second half of 2021” (Newman, Rick. 2021).

Added to this, the “polls suggest vaccine mandates … are fairly popular” as can be derived from a recent poll by “Washington Post-ABC of 1,006 U.S. adults, 52% of respondents said they support businesses requiring vaccinations for employees working in-person” (Solender, A. 2021).

 What is very disturbing to me is the action by “Republicans in Congress who have railed against” the President’s act to try and reduce absenteeism and propel the country back into full production mode, “many casting the move as authoritarian” (Solender, A. 2021). This action is what they would term in war, ‘disinformation’ which is an act to throw the allies off the true objective. 

Question – is it better to risk a repeat of last year and have more people die and have the economy and banking sector crash? 

References

Solender, A. 2021 September 9. Republicans Rail Against Biden’s Sweeping Vaccine Plan, With One Warning Of ‘Full On Revolt’. https://www.forbes.com/sites/andrewsolender/2021/09/09/republicans-rail-against-bidens-sweeping-vaccine-plan-with-one-warning-of-full-on-revolt/?sh=a8f00614cff2

Armour, S. and Siddiqui, S. 2021 September 9. Biden Boosts Vaccine Requirements for Large Employers, Federal Workers to Combat Covid-19. https://www.wsj.com/articles/biden-to-require-all-federal-workers-government-contractors-to-be-vaccinated-against-covid-19-11631195011?mod=trending_now_news_2

Newman, Rick. 2021 September 9. Get ready for the workplace vaccination wars. https://www.aol.com/ready-workplace-vaccination-wars-214316718.html

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