OPINION: The federal funds rate high enough to get 41-year-high inflation down to 2% would surely throw the economy into a deep and protracted recession, columnist Peter Morici writes.
With inflation running high for the last 14 months, we can sadly conclude it’s entrenched, will be difficult to conquer and is hardly the province of the Federal Reserve alone.Too much COVID spending and the Federal Reserve printing money to finance resulting federal deficits created too much liquidity chasing too few goods.
Global supply shortages Global and U.S. supplies of what Americans buy have been reduced by an inadequate response to fallout from climate change on global agriculture, Russian President Vladimir Putin’s Black Sea blockade of Ukrainian food exports, Western sanctions that curtail Russian petroleum exports, interruptions in global chip production, and disruptions to global shipping and manufacturing that linger from COVID.
Higher mortgage interest rates are limiting the demand for new homes, but fewer will be built and shortages will persist. Expensive rentals enable builders and owners of existing homes to keep raising asking prices. Vehicle manufactures won’t be offering mostly EVs until the 2030s and the average life of a new car is 12 years. Consequently, the majority of vehicles on the road will be petroleum-fueled until the late 2030s. Longer if the auto industry can’t find enough lithium, and that’s proving a challenge.
30% of wheat Similar logic applies to Russian and Ukrainian grain, sunflower oil and fertilizer production—for example, the two countries account for 30% of the global wheat W00, +0.06% trade. Consequently, the U.S. strategy of slowly squeezing Russia through sanctions and Russia’s control of Black Sea shipping are creating global food shortages.
Netherlands is shutting the Groningen gas field—the largest in Europe. As the Europeans completely phase out Russian gas, American consumers will feel that pain too.
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