Inflation Soars to Highest RateInflation Soars to Highest Rate

The headlines are full of stories about inflation, its causes, and what we can (or can’t) do about it. Sure, a mixture of the pandemic, supply chain failures, the Ukraine war, and the sanctions imposed on Russia contributed to the demand/supply imbalance. It started months ago with the logjam at the Port of Long Beach, expanded with the shortage of truck drivers, and then another wave of Covid-19 that shut down Chinese factories. To punish Russia, the US and the EU tried to cut off their oil and gas spigots. That hasn’t worked very well since they figured out how to game the system. The primary reaction was to drive up the international price of crude oil, and thereby the price of gasoline to 40-year records. Which brings us back to the OPEC crisis of the 70’s.

They’re playing the same game again by refusing to open their spigots of oil & gas as Russia shifts away from Europe to China to market its oil & gas. Saudi Arabia stiffed the US and refused to increase production just to show that they can. They claimed revenge because we said bad things about them and their penchant for assassinations. In the OPEC meeting Thursday, they budged a little but too late. The pipeline (either overland or by tanker) is slow, and the world-wide refining capacity also is limited.

Our dependency on oil and gas has driven domestic politics for generations and hampered any efforts at reducing carbon emissions. Exxon lied for years and now even admits it. With a transportation system that primarily was dependent upon cars and trucks, we had poor rail infrastructure dominated by a handful of corporations. We spent the majority of our budgets on the military and reckless wars so we had nothing left for rebuilding the foundations of our economy. We had a major funding bill last year; it was about two decades late and inadequate to the need.

Who is going to bail us out this time? The US Government did last year in response to the pandemic, and that drove up demand. But government has limits as to what it can do with the business cycle. The Federal Reserve directs monetary policy, but it walks a tight rope between inflation and recession. Some say we already are headed into another one. Even looking two years out, it seems likely Biden will be another 1-term President just like Jimmy Carter. The ship of state takes longer to turn around than even a battleship.

by John Suddath This email address is being protected from spambots. You need JavaScript enabled to view it.