I'm not at all surprised that U.S. Inflation is the highest that it has been in decades.
After all, the FED has been employing Quantitative Easing for the last decade to increase the money supply by 14% annually, compared to the usual 7% increase, and then the Covid relief packages increased the supply by a further 27% last year, releasing a Tsunami of dollars into the U.S - $13 trillion all-in.
(NB the cost of WW2 was around $4 trillion to give you some perspective.)
The Stimulus checks received by individuals only amounted to $1 trn of this, another $4.5 went on the vaccines (I wonder how many got thrown out or given away?) another $4 trillion on QE and then around $3 trillion on infrastructure spending - yet to be paid for in future taxes.
(Source).
With this much money being printed in such a small space of time - $13 trillion extra in two years - is it any wonder that the prices of goods have increased? That's a lot more dollars chasing a decreasing supply of goods due to the supply chain crisis.
I'm not sure interest rate rises are a solution....
The classic/ traditional response to increasing inflation is to increase interest rates to encourage people to spend less and save more.
However, I'm not so sure that's going to work - this time inflation isn't about 'an overheated economy where prices are rising because of increased demand'.
Many people simply haven't been spending during the pandemic - going out is a lot less appealing after all, as is travelling abroad (assuming you're allowed) so it's not as if people are climbing over each other to spend money - I mean Christmas and New Year were subdued to say the least.
As far as the wealthy are concerned, at least, they haven't and probably don't need interest rate rises to increase to incentivise them to save money, and besides, increasing a savings rate from 1 to 2% is hardly going to be motivational in this regard.
And as to those who have had to take on more debt to get through the pandemic, an interest rate rise would just make them struggle even more.
And it wouldn't do the government any favours either, with so many $trillions of debt to be paid off.
Finally, we've already seen the markets freaking out just on the rumour of the possibility that there might be interest rate rises coming in 2022 - which doesn't do economic growth any good, or the Bitcoin price, given that $billions of investment in crypto is from institutions these days.
Final Thoughts - Uncertain Economics....
Crisis after crisis, years of quantitative easing, the decline of the West and the rise of China, the pandemic, the supply chain crisis, everything economics just seems fractious and uncertain and insecure, out of control, and not in a good way.
There's never been a better time to be less exposed to fiat and less dependent on your wage packet!