Financial Associated Press, June 24 (Editor Marlan) In the face of increasingly fierce bipartisan rivalry, Powell is becoming a KOL (key opinion leader) on inflation in the United States.
At two hearings this week, lawmakers from both parties, eager to hear from Powell's views on who is responsible for inflation, asked questions about him. And Powell's vague words became evidence of the two parties attacking each other.
On Wednesday, Republicans shouted powell's rebuttal to Biden, arguing that Biden's fiscal expansionist policies were the cause of inflation. On Thursday, democrats responded that inflation comes from a complex global context, and the White House is slightly wrong.
Before the midterm elections, whether Biden and the White House can be "convicted" on inflation will become the continuous focus of US politics and public opinion.
How to interpret Powell
On Wednesday, at a hearing on U.S. Senate banking commissioners, Senator Bill Hagerty, Republican of Tennessee, noted that inflation in the United States had risen to 7 percent in December 2021 from 1.4 percent when Biden took office last January, and that inflation had gradually risen to 8.6 percent now since the Russian-Ukrainian conflict began. And Powell acknowledged that the rise in inflation in the United States must have occurred before the conflict in Ukraine broke out.
Powell's statement undoubtedly denies the "Putin inflation theory" proclaimed by the White House. From a Republican perspective, higher inflation is inextricably linked to stimulus measures introduced by the Biden administration, and Powell's response reinforces that view.
But at Thursday's House Financial Services Committee, Powell again gave a vague response to Democrats' "patch-up."
Democratic lawmaker Gregory Meeks said the price increase was mainly caused by supply chains, the Russian-Ukrainian conflict and the new crown virus. Powell responded: "Almost, that's a good description. ”
While stimulus spending is a factor, he said, "most of the commodity prices seen have risen because supply outstrips supply."
This statement was also seen by the Democratic Party as a statement that Powell supported the White House's infallible inflation.
But what role do Biden and his policies play in the current round of historically high inflation in the United States?
Inflation rose after economic assistance
Since the beginning of the Russian-Ukrainian conflict, Biden has been trying to interpret high inflation as a consequence of the Russian-Ukrainian conflict and to divert the focus of the conflict with the sensational "Putin inflation".
But in fact, inflation in the United States has been rising since Biden took office last January. Against the backdrop of a global recovery from the pandemic, inflation in the United States was unremarkable at the time, but was seen as a side effect of economic growth and was not criticized too much.
But according to an article by the Federal Reserve Bank of San Francisco, comparing the core inflation rates of the United States with similar advanced economies, the authors found that by 2021, the core inflation rates in the United States were not significantly different from those of the other eight countries (Britain, France, Germany, Canada, the Netherlands, Norway, Sweden and Finland); But after 2021, core inflation in the United States soared.
The article unceremoniously points to the financial support measures issued after Biden took office as president and estimates that this "helicopter money" behavior will boost U.S. inflation by about 3 percentage points by the end of 2021.
Fast forward to the time when Biden first took office in 2021, and Biden supported the idea that economic expansion measures under high deficits would not create high inflation. His proponents agree that expanding too little is more risky than taking it.
According to the data, Biden passed the COVID-19 bailout bill and the bipartisan infrastructure bill in March and November 2021, with budget sizes of $1.9 trillion and $1.2 trillion, respectively. In the months since the bill went into effect, inflation in the United States has seen a marked climb.
But these stimuluses have not really fallen into the hands of consumers, and the year-on-year change in average hourly earnings in the United States has been below inflation since March 2021, meaning that the gap between income and consumer prices has been widening.
Biden's economic bailouts, in the initial sense, have not only failed to make Americans richer and more purchasing, but have been weakening consumer affordability and fueling price levels all the way up.
Now there are Republicans who turn back the old books and think that the best spending scale at that time should be $300-500 billion, and Biden's over-stimulation behavior is the real cause of the overheating of the market.
Production and sales in the gasoline market are mismatched
Biden has now loosely acknowledged that the White House's mistake was simply underestimating the magnitude of the price spike and the risk of persistence.
But at least from the perspective of gasoline, he is not innocent.
On biden's first day in office in 2021, two energy-related executive orders were signed: rejoining the Paris Climate Agreement and reviewing the Trump-era green light policy on petrochemical projects, and suspending pipeline operations that import large amounts of oil from Canada.
Biden is obsessed with the energy transition, and has successively promoted policies such as suspending government support for overseas traditional energy projects and requiring investment companies to switch to clean energy projects, and it is clear that the US fossil fuel industry has not ushered in a tailwind period during the US economic rebound in 2021.
From the chart above, the United States began to decline sharply due to the epidemic in 2020, and until recently it has been fluctuating on a not very high production.
If you only look at the crude oil production during Biden's term, the fact that the US crude oil market is suppressed will be more obvious. It can be seen that from January 2021 to March 2022, the daily production curve of US crude oil is more close to a horizontal line, while in contrast, the price of gasoline, a downstream product of crude oil, has risen all the way up and ushered in a steep rise after Russia and Ukraine.
High oil prices have become the most intuitive way for people to feel inflation, and Biden's approach is to accuse oil companies of not stepping up their exploitation, and on Wednesday turned again to accusing gas stations of seeing money and collecting money in an immoral way.
However, in a well-known TV show in the United States, the host bluntly said that Biden did not understand anything. Gas station owners price their retail sales primarily based on gasoline supply contracts purchased or signed from upstream companies.
If Europe's energy crisis may be its dependence on Russia for energy, then the high oil prices in the United States are mainly due to Biden's overconfident energy transition plan.
But neither the White House nor the Democrats will admit it, and Powell's speech, the Fed's top official, has been key to high inflation in the midterm elections between the two parties.
The two parties in the United States may only care about who wins the midterm elections, but they are not so concerned about the consequences of inflation, and the final result may only be as Powell reluctantly admitted, there is no guarantee of avoiding a recession, and the United States enters a painful downward cycle.
This article originated from the Financial Associated Press