Politics, Government & Public Policy: May 2022 Archives

Inflation Is About Expections, Not Only Reality

In this new era of stagflation it's important to remember that inflation is caused by expectations as much as by reality. If people and companies expect prices to go up, they'll start charging more for their products and services -- which is inflation. Inflation will only abate when expectations change.

So when we see a chart like this one it's not only that President Biden's policies created inflationary conditions, his policies also created the self-fulfilling expectation of inflation.

Presidents Obama and Trump spent boatloads of borrowed money and ran up the deficit, but something about President Biden (and, of course, the global environment) really spooked people.