Opinion: The Cause of Inflation

Jarrett Reiter, Reporter

Consumers are hurt by the rising prices in gas, food, and energy due to the high inflation rate. According to the U.S Bureau of Labor Statistics, the rate for October is about eight percent rounded up. It reached its peak in June at about nine percent before starting to decline. During this peak, the inflation rate for food was 11 percent, the rate for gasoline was 60 percent, and the rate for energy was 41 percent.

Obviously, both the consumers and politicians made accusation from accusation on who is to blame for this inflation. Some pointed out the Russian and Ukrainian war while others pointed to the current president, Joe Biden. These accusations, however, don’t bring any answers. Firstly, Russia’s invasion on Ukraine doesn’t seem to have any substantial effect on U.S inflation, and it doesn’t explain how the rate reached seven and a half percent before the start of the invasion. Secondly, the president doesn’t have any direct control over the economy. He may have a minor influence through the signing of policies and regulation, but that doesn’t make him responsible for the cause or the solution for inflation. 

This inflation is caused by the national bank, the Federal Reserve. The Federal Reserve increases inflation by offering low interest loans to banks. This increases the incentive to borrow money and, therefore, increases the supply of money. They could raise the interest rates to decrease the money supply and inflation. However, doing so will make borrowing money more expensive and cause an artificial recession. This makes people go further into bankruptcy and poverty. This would also close down business and further unemployment. Either way, their decision will negatively impact the citizens that they are trying to help.

With any high inflation rate comes a recession. There are no signs of a recession beginning in 2022. However, economists are predicting that a U.S recession will start around 2023. This recession will bring unemployment and a drop of consumer spending, slowing down all economic transactions and functionality. This will come when there is a large amount of supply that isn’t getting purchased. This usually comes from high inflation, since the economy needs to be slow in order to decrease it. There will always be a type of recession. The question is how terrible will it be? 

The Federal Reserve has really caused themselves and the country issues. With their record low interest rates, they increased inflation. When they increase the rates, they will cause an artificial recession even though the country is already heading towards one naturally. They dug themselves a hole that they can’t escape clean.