In December, I speculated that we were on the downslope of rising inflation. I was wrong.

In February, the consumer price index hit 7.9%, another 40-year high. To be sure, this is nothing like the 14.6% in early 1980, but it’s a switch from the “great moderation” years from the mid-1980s to the Great Recession and the low inflation of the recovery.

Nor was I alone: The Federal Reserve and many private forecasters consistently misjudged how the strength of the recovery and its ongoing high demand, combined with disrupted supply chains, would juice inflation.

High gasoline and food prices are as big a political problem for the Democrats now as they were for President Jimmy Carter in 1980. Gasoline prices have more than doubled since early 2000, even though President Joe Biden has no control over them. Republicans are blaming him and plenty of voters will agree.

The economic problem is more complicated. We could be in for the kind of “soft landing” that Fed Chairman Alan Greenspan was famous for in the 1990s. On the other hand, we could face a recession, a disconcerting number of which were caused by central bank missteps in the post-World War era.

The independent Fed might be forced into the scorched-earth battle fought by then-Chairman Paul Volcker, appointed by Carter in 1979 (and renominated by President Ronald Reagan). Volcker pushed the key lending rate to nearly 20% in 1981, bringing on a shattering recession but killing the inflation that had been gathering since the late 1960s.

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That’s an extreme outcome, even with investors betting inflation of 3.5% annually will stick around for 10 years. The Fed’s target is 2%. But the rate increases that Jerome Powell’s Fed is embarking on put the economy on a knife’s edge. Goldman Sachs places the chances of a recession at only 35%. But this is an especially bad year for crystal balls.

Let’s tease this out a bit.

Oil prices have been pushing inflation for months. This is despite the United States being the world’s largest oil producer (Yes! In 2020, we produced 20% of the world’s total compared with 12% for Saudi Arabia and 11% for Russia). This is in part from fracking ramped up during the Obama years and continued under the Trump administration. But we’re also a huge oil consumer.

Biden did institute a pause of new drilling on public lands. But oil companies are only using less than half of the acres already leased to produce oil and gas. Blame Big Oil for some of those higher gasoline prices. They will eventually bring more crude to refineries, but it will take time.

Oil is a commodity sold on world markets, not country by country. The slump in prices at the beginning of the pandemic was followed by a spike in global demand. Hence, raising global inflation. Some Russian oil is off the market — as much as 30% — because of Western sanctions. Russia represented 12.5% of global oil exports as of 2019, second behind Saudi Arabia at 14.7% (the United States exported about 6.3%).

At a certain point unless other exporters such as Saudi Arabia step in, high oil prices can cause a recession.

Russia’s invasion of Ukraine has caused other inflation pressures globally. For example, prices are soaring for the wheat supply because Ukrainian Black Sea ports are blockaded. Ukraine and Russia account for about one-third of the world’s wheat exports.

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The other inflation driver is supply chain troubles. The latter may get worse because of China’s ongoing pandemic.

Beijing has put Shenzhen, a city of 17 million, into lockdown because of persistent COVID-19 infections, and restricted access to Shanghai. This is sure to further snarl the supply chain, driving up prices.

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The paradox is that inflation emerged with the “Biden Boom,” with fourth-quarter 2021 gross domestic product rising a strong 3.5% and the labor market showing steady improvement.

In February, the national unemployment rate was 3.8%, below what economists consider the “natural rate” of full employment.

The “Great Resignation” of people leaving their jobs in record numbers as the worst of the pandemic passed was mostly people quitting for better opportunities and wages.

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Edward Wolff, an economics professor at New York University, even argues that inflation helps reduce inequality.

“In net terms, inflation has benefited the middle class and adversely affected the very rich,” he wrote on the site Project Syndicate. “It has also helped to limit both overall wealth inequality and racial and ethnic wealth gaps. Those who worry about the recent uptick in inflation — beginning with the Fed — should bear this in mind when considering whether and by how much to tamp it down.”

Meanwhile, household, business and government debt was held down by Federal Reserve measures, along with effective relief bills passed by the Republican Congress in 2020 and the Democratic Congress in 2021. (Trump Treasury Secretary Steven Mnuchin played a surprisingly constructive role in helping midwife the first bill).

As economic blogger Noah Smith wrote on his Substack column, “Calling this the Biden Boom might be a little too simplistic — it’s really the Powell-Mnuchin-Biden Boom. And it’s an encouraging sign that when it really counts, America’s leaders can get it done — they can take action that’s swift, intelligent, and bipartisan, and successfully overcome a crisis. Once again, our institutions are more resilient and more effective than we tend to think.”

Let’s hope this continues as the Fed takes on inflation.