“I just spent twenty bucks on @#$% pizza,” a guy said into his phone as we passed each other in the airport. Moments later, I myself was spending twenty bucks on two hot sandwiches for my family. (Not very thrifty of me, I know! But, my wife, who is nursing, was famished, and we were rushing to catch a flight during a brief layover.)
I didn’t cuss about it, but I empathized with my fellow traveler who did. Of course, airport food has long been notoriously pricey, but the frustration in his voice made me wonder if “John Q. Public” is losing patience with perpetually rising prices.
“U.S. inflation accelerated to 8.5% in March,” The Wall Street Journal reported this morning, “rising at its fastest annual pace since December 1981 as an unrelenting increase in prices led to a sixth straight month of inflation above 6%.”
Who will an exasperated public blame for this? President Biden is eager to pass the buck, dubbing the latest leap in inflation “Putin’s price hike.” To be sure, the conflict in and over Ukraine has put upward pressure on prices, especially for energy. But this supply disruption is just a new, grisly chapter in an ongoing “supply chain” crisis that began with the COVID-19 lockdowns.
And the crisis is primarily a case of “supply chain sabotage,” as the economic havoc is chiefly due, not to the pandemic itself, but to the heavy-handed responses to it by governments around the world.
One of those responses has been flying under the public’s radar, but is actually the main factor of US price inflation (virtually the only factor, if we were to define “inflation” properly): a mammoth money-printing campaign by the Federal Reserve, as FEE economist Peter Jacobsen has explained.
Yet it is the Fed, the prime culprit of inflation, that officialdom looks to as our inflation-fighting hero.
"Federal Reserve governor Lael Brainard said Tuesday at WSJ's Jobs Summit,” the Journal reported, “that the central bank will raise rates expeditiously to reduce soaring inflation and expressed confidence in its ability to moderate price pressures without triggering an economic downturn."
But, as one of the Journal’s own op-eds recently argued, the Fed probably won’t be able to stick such a “soft landing.” The inflationary crisis may be followed by a market crash crisis.
It’s a crisis we need. As the Austrian economists’ explanation of business cycles makes clear, a crash is a correction and the first step of the economy’s natural healing process. Forestalling a crash further with still more money-printing will only make the inevitable and necessary reckoning all the more painful.
But some measure of economic pain will be unavoidable. And if the guy I overheard at the airport was grumbling about pricey pizza, imagine the expletives he’ll utter if the coming crash costs him his job.
Then who will John Q. Public blame for that? Will it be rightly laid at the door of big government? Or will the establishment be able to once again pin the blame on capitalism and exploit the crisis to seize even more power over the economy?
It all comes down to economic literacy. The more thoughtful and open-minded members of the public must be informed about basic economic principles and how those principles are playing out in the news and in their wallets. Only in that case will they be able to distinguish between culprits and heroes, problems and solutions, when inflationary pressure causes the economic bubble—and public patience—to pop.
This article was adapted from an issue of the FEE Daily email newsletter. Click here to sign up and get free-market news and analysis like this in your inbox every weekday.