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The Inflation Red Herring

Summary:
Far from signaling the return of significant inflation, temporary price increases are exactly what one would expect in a recovery following an economic shutdown. Whether those peddling inflation fears are pursuing their own agenda or simply jumping the gun, they should not be heeded. NEW YORK – Slight increases in the rate of inflation in the United States and Europe have triggered financial-market anxieties. Has US President Joe Biden’s administration risked overheating the economy with its .9 trillion rescue package and plans for additional spending to invest in infrastructure, job creation, and bolstering American families? Making America Global Again Al

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Far from signaling the return of significant inflation, temporary price increases are exactly what one would expect in a recovery following an economic shutdown. Whether those peddling inflation fears are pursuing their own agenda or simply jumping the gun, they should not be heeded.

NEW YORK – Slight increases in the rate of inflation in the United States and Europe have triggered financial-market anxieties. Has US President Joe Biden’s administration risked overheating the economy with its $1.9 trillion rescue package and plans for additional spending to invest in infrastructure, job creation, and bolstering American families?

Such concerns are premature, considering the deep uncertainty we still face. We have never before experienced a pandemic-induced downturn featuring a disproportionately steep service-sector recession, unprecedented increases in inequality, and soaring savings rates. No one even knows if or when COVID-19 will be contained in the advanced economies, let alone globally. While weighing the risks, we also must plan for all contingencies. In my view, the Biden administration has correctly determined that the risks of doing too little far outweigh the risks of doing too much.

Moreover, much of the current inflationary pressure stems from short-term supply-side bottlenecks, which are inevitable when restarting an economy that has been temporarily shut...

Joseph E. Stiglitz
The official account of Joseph E. Stiglitz, Nobel laureate economist based at Columbia University.

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