Leibowitz on Trade: Running Low on Everything

Two phenomena that we have not seen in a long time have recently appeared. Whether they are short-term events or long-term realities is provoking debate. I am speaking of the distinct but related issues of inflation and shortages of, it seems, nearly everything.

Inflation was a major factor in the U.S. economy throughout the 1970s. The term “stagflation” was coined during that time (just in time for the 1980 presidential campaign that resulted in Ronald Reagan’s landslide victory over President Jimmy Carter). Since then, inflation has been a topic of minor interest—until this year. With the apparent demise of the COVID-19 pandemic, and government efforts to return to vigorous economic growth, inflation has now appeared. While the Biden administration, for good political reasons, has sought to minimize the problem, the most recent inflation report last month revealed that most of the economy experienced significant inflation in April. Consumer prices rose a seasonally adjusted 0.8 percent in one month and the annual rate of inflation was 4.2 percent, the highest rate since 2008, the year of the financial crisis. Industrial goods including steel and aluminum, food and services (bought an airline ticket lately?) all contributed to the increases.