By E. P. Unum
In Macroeconomics 101, I learned that “too many dollars chasing too few goods” is the very definition of inflation.
I also learned that in periods of recession, fiscal and monetary policy demands the government relax constraints on the money supply and “pump” more money into circulation by purchasing bonds in the open market.
Conversely, in periods when inflation raises its ugly head, the opposite strategy comes into play… the government increases its control over the money supply and available credit and sells bonds in the open market to take money out of circulation.
Why then is the Biden Administration ignoring these time-tested principles and planning on spending trillions of dollars when our economy is growing substantially?
I just heard Biden speak about the “pressing need” to approve his infrastructure plan. His idea: ‘we need to spend more money to allow government to move on projects that will drive down prices not increase them.”
Such a policy has not worked in the history of mankind and it will not work this time either.