Biden's To Blame For US Inflation

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For the decade prior to the Covid-19 pandemic, transfer payments rose in a straight line, in keeping with the size of the economy.

Graphic: Asia Times

Not only did Biden throw an additional US$2.5 trillion into consumer pockets but his administration kept transfer payments about 20% above the long-term trend line.

That produced a collision between turbo-charged spending power and limited production capacity. Prices rose faster than at any time in the past 40 years.

The shock to consumer demand kept inflation going with lags. Prices rise and employees demand pay increases to compensate, and businesses in turn raise prices to pay for the additional labor costs.

Rents go up but the impact isn't felt until leases are renewed. A boost to demand affects prices over 12 quarters, that is, three years.

The blue bars in the chart below show the correlation between each quarter's change in transfer payments and year-on-year change in the US Consumer Price Index (CPI) in subsequent quarters.

The impact of increased transfer payments on prices, analysis shows, peaks after about six quarters.

Graphic: Asia Times