Some thoughts on inflation - InvestingChannel

Some thoughts on inflation

Ramesh Ponnuru offers some advice to the GOP in Bloomberg:

Republicans Can Extend Their Midterm Inflation Advantage

Rising prices will help the GOP in November. Supporting monetary tightening, pursuing smart tariff and regulatory policies and restraining Democratic spending would help even more.

These are good ideas, but Ponnuru is calling on the GOP to repudiate the economic policies favored by Donald Trump, which were easy money as far as the eye can see, recklessly expansionary fiscal stimulus, and dumb tariff polices. Given that the modern GOP is little more than a Donald Trump personality cult, that seems unlikely.

I have another (albeit even more unrealistic) idea, remove the oil export sanctions on Iran:

Iran has capacity to double oil exports if there’s sufficient demand, a top official said, even as a deal on the country’s nuclear program that could pave the way for the lifting of sanctions remain elusive.

Iran will “exert maximum effort to recoup its crude oil market share and revive its customers,” Mohsen Khojastehmehr, managing director of the National Iranian Oil Co., told reporters Saturday in Tehran.

Even by the standards of US foreign policy, allowing oil exports from Russia but not Iran stands out as particularly absurd. Yes, Iran sponsors terrorism. But Russia literally invaded a European country of 40 million people. And Iran is supposed to be the bigger threat? Our sanctions policies (including Europe) have actually helped Putin (and hurt Ukraine) by driving energy prices much higher. In fairness, we have supplied Ukraine with weapons—Trump would have made them dig up some dirt on Hunter Biden before doing so.

You might wonder if my suggestions are consistent with my previous claim that the Fed is 100% responsible for any excess inflation, which is roughly any inflation caused by NGDP growth above 3% or 4%. Think of it this way. For any given NGDP growth rate, reducing supply-side constraints would have the effect of shifting growth toward RGDP and away from inflation.

Alternatively, you can think of supply-side reforms as reducing the Fed’s preferred rate of inflation for 2022. So while the Fed ultimately controls the rate of inflation, supply-side reforms can help at the margin. They can make the Fed target a lower inflation rate.

PS. You might think that I’m being a bit harsh describing the GOP as a Trump personality cult. After all, the GOP still includes moderate people like Elise Stefanik. It’s true that Stefanik was a moderate, and indeed opposed many of Trump’s policies. But that was then. Now, the 3rd ranking member of the GOP House caucus is pretending to be a wild-eyed conspiracy nut to please her voters:

I’m occasionally called a pedophile by commenters, and I always wondered where that specific insult came from. Now I know. It means they think I’m opposed to starving innocent babies.

PPS. So who is actually depriving America’s babies of milk? The usual statist grifters like Trump and Biden, and the various businessmen that who support trade barriers on milk from other countries. Oh, and Elise Stefanik:

In January 2022, following Stefanik’s advocacy, a USMCA dispute settlement panel ruled in favor of the United States that Canada is breaching its commitments under the USMCA by unfairly administering dairy tariff-rate quotas in a way that harms American dairy farmers. 

“New York Farm Bureau appreciates Rep. Stefanik’s outreach on behalf of dairy farmers in her district and across the state.

(Yes, that’s regular milk, but we also have trade barriers on infant formula.)

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