Economics/Class Relations

A month of inflation does not a crisis make

By Ryan Cooper, The Week

Don’t throw away the best economic opportunity in 20 years for panic and austerity.

The United States economy is in much better shape than it was in April 2020, when we lost 6.1 million jobs in a week. Indeed, demand for certain things — particularly durable goods — has been so strong it has created significant inflation for the first time since 2008 (6 percent on an annual basis as of October).

That’s fueling calls for the Federal Reserve to start hiking interest rates: “Fed faces fresh pressure to raise interest rates,” reads a headline at Fox Business. “I increasingly think the right thing to do is declare victory and raise interest rates,” prominent Substacker Matt Yglesias recently tweeted. Policymakers’ “focus on the challenges of the last crisis has fueled some of the challenges of this crisis,” writes Neil Irwin at The New York Times.

We’ve too much economic stimulus, the argument goes, and now it’s time for austerity. 

But that would be a grave mistake. America has a real chance to experience a genuine economic boom over the next couple years, one that might heal some of the lasting economic scars of the lost decade that followed the 2008 crash. Some moderate — and likely temporary — inflation is an acceptable risk to give that boom its best possible chance of happening.

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