Cheap money, as well as demand, drives inflation

Progressive Democrats have bought into Modern Monetary Theory. They suggest that governments that control their money supply will never default because they can borrow or inflate to cover it.

Implicitly, progressives suggest that deficits are not a concern.

Today, governmental debt has risen from 87% of GDP in 2019 to 122% in fourth quarter 2021. Recent highly stimulative fiscal and monetary policy, an annual structural deficit, low unemployment, low legal immigration and supply issues have caused high inflation of 7% in 2021.

Pundits have ascribed the current high inflation to supply issues, but economists assert that it accounts for no more than half. Cheap money has driven up the prices of investments, houses, the price of everyday necessities beyond their real economic value. To address the excess, the Federal Reserve will likely need to raise interest rates not to the 1% level currently being discussed but to 2% or even more if fiscal policies remain so stimulative.

Unless we get our fiscal house in order, people will suffer even more.

Byron E. Miller

Warrenville