Thread by @AstorAaron

Inflation is caused by too much money chasing too few goods. The situation today is directly connected to the pandemic warping of supply and demand - first a collapse in demand --> major production/distribution cuts and then a massive increase (w/ stimulus & savings) in demand.

As long as pandemic restrictions continue to affect and warp the global market, consumers, producers and distributors will continue to guess - and often guess wrongly - about supply and demand.

You cannot look at inflation by looking at only half of the ledger. The problem is BOTH too much cash accumulated (and pent-up demand) AND warped/limited/uncertain supply. Responding knee-jerk to half of the ledger would be as disastrous as some of the bad pandemic responses.

This is a global problem, not just an American one. The global economy is like a twisted garden hose. It will lash about as it becomes untwisted. But the only way inflation comes under control is when the garden hose flows smoothly again and consumers & producers can adjust.

This isn't the 1970s, BTW, and we should not look to the same solutions used back then. Production/trade inefficiencies and the oil shock drove the 1970s crisis. But there IS an analogy in that the pandemic cut supply of goods and disrupted trade. Return those to normal ASAP.

This is pretty good on the drivers of inflation. The common thread is clogged supply chains despite increased demand.

washingtonpost.com/business/2021/…

For the inflation problem overseas, here is Europe. cnbc.com/2021/10/01/eur…

Inflation in China. marketwatch.com/story/asian-ma…

Inflation cutting into wages in Japan. reuters.com/world/asia-pac…

India wrestling with inflation too. qz.com/india/2071113/…

Latin America confronting inflation. ft.com/content/a243dd…

Nobody is exempt from global inflation right now. That doesn't mean US (or non-US) policy makers are completely powerless to confront it. But it does mean that the resolution is going to come only when GLOBAL supply chains become smooth and predictable again to meet demand.

Part of what makes this difficult is that labor supply is also uncertain as workers reassess their career options & bargaining positions after 18 months of disruption. So it's not just a matter of physically unclogging ports, etc. Rank-and-file workers will play their cards too.

Also, when I say that pandemic restrictions need to give way, I'm not just talking about within the US. I'm talking about Vietnam and Malaysia and other nations in the global supply chain. Another reason why global vaccination is so important in the return to a normal economy.