I see in other threads people are still worried about inflation. Not me!
I again do hope we stay above 4% inflation for years as a partial debt jubilee.
But BBB failed and the GOP had a 90% chance of taking the house.
The days of showering the working and middle class with CovidBux is over.
Just one example, the $300 per child per month tax credit expired this month. For a family of 5 with a median US income of about 50K, that’s a sudden drop in after tax/after rent/mortgage income of about 25%!
Total covid transfer payments were about $5 trillion. Probably 80% of that was spent on goods and services at a time when supply was flat or declining! Kevin Drum has usefully noted that it appears that when the spigot was really gushing with PPP/stim payments/extended unemployment, and a lot was shut down, the funds were heavily saved even by cash constrained households who normally spend all extra funds.
These households however have been gradually spending down excess savings and are now back to normal levels.
In summary, consumer powered demand inflation will disappear. Meanwhile supply shortages that are heavily caused by labor shortages will decline as covid subsides and people return to work. Biden is also relaxing Trump’s immigration controls.
