Navarro: Biden, Democrats, & China Are To Blame For America’s Stagflation Mess
When President Joe Biden canceled the Keystone Pipeline and ended the leasing of Federal lands for oil and gas exploration, he not only ensured an energy price shock. He would spike food prices. To understand why is to understand the stagflationary morass America now finds itself in.
Amidst slowing economic growth, America’s working classes and small businesses are indeed under attack from a virulent inflation.
Milk is up 4.5% annually, beef 13.9%, used car and truck prices have broken the 30% barrier while gas prices are up nearly 60%. While gross pay has increased by 4.8%, real wages are down by nearly 2%.
This pandemic-driven and politician-made disaster is a situation eerily similar to a 1970s stagflation spawned by over-stimulative Keynesian policies and related demand-pull inflation along with cost-push inflation energy and food price shocks.
Demand-pull inflation happens when “too much money chases too few goods.” A profligate White House and Democrat Congress have appropriated trillions upon trillions of poorly targeted expenditures while the Federal Reserve has accommodated this profligacy by running a massive printing press.
After lying to us that the resulting inflation would be “transitory,” Fed Chairman Jerome Powell finally fessed up when he announced an acceleration of the tapering of the Fed’s accommodation – effectively ending Powell’s ultra-easy money policies. Note to Jay: This action will NOT end the budding wage-price spiral.
America’s far bigger problem is the cost-push inflationary pressures arising primarily from food and energy price shocks but also from broken global supply chains and the export of Made in China inflation. And the Fed has nary a tool in its shed to fight any of this.
Consider what happens when energy and gasoline prices rise. Businesses cut output. Consumers have less purchasing power for holiday shopping.
In the aggregate, the result is slower growth – that’s the stag part of the stagflation equation. If the Fed engages in contractionary monetary policy as a “cure,” this merely exacerbates the stag part of the problem. America’s current energy price shock is indeed a politician-made disaster. Canceling the Keystone Pipeline, ending petroleum exploration on federal lands, and more broadly signaling to petroleum producers that additional investment will be penalized by Rep. Alexandria Ocasio-Cortez, D-N.Y., and her Green New Deal cadres has led inevitably to cost-push inflation in the oil patch.
The dark joke going around football tailgate parties is that caviar is now on the menu because it’s less expensive than hotdogs cooked with propane.
Ominously, energy price shocks also beget food price shocks. Petroleum is THE most important production input for fertilizer. It also takes a lot of now expensive fuel to transport products from farm to market and table.
As in the 1970s, today’s food price shocks are also weather-related. With over half of the lower 48 states in drought, it’s not just lower yields driving up prices. Farmers are switching away from water-intensive crops like vegetables and melons. In a Marie Antoinette White House, perhaps the slogan will be “let them eat cheap almonds.”
Communist China has also significantly increased its purchases of farm products, further pushing up prices for American consumers. For example, corn exports to China are up five-fold, from four million metric tons in 2020 to 20 million metric tons this year.
At the same time, Communist China’s producers are now not only exporting their products to the US, and driving our trade deficit, and stealing American jobs. With inflation rising faster in China than the U.S., these economic predators are exporting China’s inflation as well.
As a coup de grâce, global supply chains are in shambles as a result of the pandemic. The poster child here is a global computer chip shortage which has crippled US auto production.
Fewer new cars has rippled into the used car market, which is on fire,. A robust used car market, in turn, has delayed the scrapping of used cars; and at least partly as a result, we see soaring prices for scrap metal – up 10.7% – as well as for downstream products like hot-rolled steel and strip.
The pandemic from communist China has even dramatically changed critical buying patterns of the American people. A new “my home is my castle” ethos of Americans fed up with economic lockdowns and forced to spend more time in their residences has driven up home prices by nearly 20% year-over-year.
Defeating this stagflationary beast will require a broad-based strategy involving the end of profligate fiscal and monetary policies, onshoring our factories and supply chains, and a sane energy policy that leverages America’s abundant resources. Both the White House and Fed must also come to grips with the fact that simply quelling demand-pull inflation won’t stop a wage-price spiral driven largely by cost-push pressures.
Finally, it may be time to revisit both our trade and diplomatic relations with Communist China. It should be clear that most of America’s runaway inflation has originated from a pandemic almost certainly unleashed from the Wuhan Institute of Virology – likely with the help of Tony Fauci’s American taxpayer funding of dangerous gain-of-function experiments conducted by the Chinese military.
It is unlikely we can ever fully come to grips with this pandemic and its economic fallout until Communist China comes clean about how the virus was genetically engineered – we still don’t have the original genome of that virus, a critical piece of the broader pandemic puzzle. Until China and Fauci come clean, it is going to be a rocky stagflationary road.
Sun, 12/19/2021 – 16:15