ELAM: The real cause of inflation

Neither Powell nor Brainard deserves reappointment, inflation is three times above the Fed 2% mandate

Wall Street Journal Editorial Board, Today November 23, 2021

Indeed, if one were to assemble a checklist on how to boost inflation, Team Biden has checked every box since its first day on the job. Let’s count the ways.

1. By November 2019, crude oil production in the U.S. stood at 12.9 million bpd. By May 2020 it had fallen to 9.7 million bpd, a 25% decrease.

2. Team Biden appoints Jennifer Granholm as Energy Secretary. She thinks OPEC sets world prices, which it does not, rather the markets do that.  And every public statement she makes is hostile to the oil industry. It is no wonder producers fear increasing drilling or production.

3. Increased regulations include slowing approval of leases on Federal lands, taking thousands of acres of Western property off limits to drilling, killing the Keystone Pipeline, and threatening to close the Michigan Pipeline. Taken together, again what message does this send to the oil industry? At the same time, approve a Russian Pipeline to supply the EU with energy. Which side is this administration on?

4. Rather than encourage U.S. production, Biden asks OPEC to increase output. Why would OPEC want to increase supply and decrease their prices?

5. Team Biden in an effort to smoke screen the real culprits, launches an FTC investigation into why gasoline prices are so high. Expect the usual Democrat scolds, Sadler, Warren, Schiff, to hold hearings to embarrass industry officials who are being stifled from doing their jobs.

6. Re-appoint the Fed chair who has flooded markets with trillions in cash buying bonds. This increases the money supply which pressures higher prices, too much money chasing too few goods.

7. The broker call rate, the interest charged on margin security purchases, is a mere 2%. Like 10% margin in 1929, this encourages speculation driving Tesla to a 350 price earnings ratio.

8. Ditto mortgage rates at 3%. This encourages real estate speculation and house flipping. Now the average U.S. house price is about $369,000, good luck first- time home buyers.

9. Pump extra payments into the economy to the point that ten million jobs are now vacant. Again, the money supply is increased.

10. Pass trillion dollar spending bills which do not build any fixed assets, instead helping solar, wind, and union supporters, hello money supply on a binge.

11.  Release 50 million barrels of oil from the strategic reserve. This is not the purpose of the strategic reserve. What if OPEC decides to impose Embargo III right now, then what? Do you suppose OPEC and Russia are thinking just that, talk about raising oil prices, that would do it.

Before we go, U.S. civilization is at best fraying at the edges. The President and Vice-President pronounce negative labels for a person on trial. Looters ransack San Francisco and New York Stores. A man on $1,000 bail drives his car into a parade, killing five and injuring numerous others. It’s not Mad Max nationwide, but this is certainly a good start.