It Was Never Biden's Inflation

What causes inflation?

It's been abundantly clear, even before the debacle which was this past election, that voters really don't know the answer to this question. Instead, they blame whoever happens to be in the Oval Office at the time the inflation happens, which is neither fair nor informed. So, as a recap, let me just remind everybody out there what exactly happened to drive prices up in 2021.

It had nothing to do with Biden.

It had everything to do with Trump, and his mismanagement of the Covid crisis, compounded by Vladimir Putin's war with Ukraine, and a whole host of other mishaps Biden had no control over.

People generally don't know this, but a president has very little control over an economy. The Federal Reserve has more direct control through use of interest rates, and that's rather like trying to steer a barge with a single oar.

To give you a good sense of how the Trump/Putin inflation happened we need to review economics 101 to see how exactly inflation works. Then we will go over a timeline of how the events transpired to drive up prices.

Causes of inflation:

Supply shock - When something disrupts supply, such as a natural disaster, or foreign government intervention (war, embargo, etc.).

Demand shock - Something triggers high demand, such as when a central bank lowers interest rates too much, or a government raises spending too high.

Cost-push - When the cost of producing goods and services rises, forcing businesses to raise their prices.

Demand-pull - When the demand for goods and services in the economy exceeds the economy's ability to produce them.

There are others, of course, but those are the main ones.

Now let's see these in action. You can follow along with the following graph showing how inflation transpired during this time period. (Source, Statista. Click here to see.)

Stimulus Round 1 (Trump), March, 2020 - The CARES Act is passed in Washington. Millions of Americans received stimulus checks, $1,200 per taxpayer and $500 per child. That, and/or PPP loans. But due to the Covid shutdown, this money was either used for the sustaining of businesses or personal finances, or saved for later. Since those who saved it couldn't really go out and spend it anyway, that happened for many Americans. Inflation wasn't affected - yet.

Stimulus Round 2 (Trump), December 2020 - The Consolidated Appropriations Act is passed. $600 per taxpayer plus $600 per child. Again, this money is used either for basic upkeep or saved.

Also, December 2020, Pfizer and Moderna receive FDA approval for their Covid-19 vaccines. Emergency vaccinations begin in earnest for first-responders.

January/February 2021, vaccine approval is granted for anyone in a food-related industry. (Here's where I got mine, as I was employed at a manufacturer of spices and supplements at the time.)

February 19, 2021 - Sudden cold snap reaches as far south as Texas. Food and fuel shortages result. Gas prices begin to rise.

March 2021 - More and more people get vaccinated. The pandemic feels like it's ending.

**Note: Here's where people stop hunkering down and start spending some of their saved money. Demand pressure goes way up.

Stimulus Round 3 (Biden), March 2021 - The American Rescue Act is passed. $1,400 per taxpayer, $1,400 per child.

Demand increases, but supply is short due to the lockdown causing businesses to pare back. They begin to respond, but it's too little, too late. Inflation rises to 4%.

**Note: This is both Demand-Shock and Demand-Pull. Admittedly, on this part, Biden has a portion of blame, since Trump did the first two stimulus bills, and Biden did this third one. The extra stimulus was probably too steep and too late in light of the Covid crisis beginning to ebb. But the dollar amounts weren't really significant for long-term inflation. That came later.

April, 2021 - With many Americans now vaccinated, people are hopeful for a return to normal. They begin going out more, and spending more. But supply chains are still limited. China's zero-Covid policy is still in place, and businesses are still trying to ramp back up to normal.

More buyers, less goods to buy. So naturally, right around here, inflation rises to 5.4%. It hovers there for several months. And there it would have stayed or come down, except for what happened next.

May, 2021 - A Coronavirus surge tears through India, causing manufacturing delays across a wide spectrum of industries.

June, 2021 - West Coast wildfires rage so widely that smoke changes the color of the sky in Chicago and Cleveland. This further complicates supply chains and prices.

July 29, 2021 - The Ever Given container ship becomes wedged in the Suez Canal, causing huge supply chain disruptions globally.

August 2021 - Hurricane Ida hits the southern coast, closing ports and further disrupting fuel and supply chains.

August, 2021 - the Meishan terminal in Ninbo, China, a major shipping center, shuts down for two weeks. The Shanghai Airport terminal also shuts down, further causing shipping delays and price increases.

** And all of these things add up to Supply-Shock and Cost-Push. With supply chains being disrupted right before stores began prepping for the peak seasons of Halloween, Thanksgiving, and Christmas, prices really start to climb.

September, 2021 - As China's shipping re-opens, and American ports struggle to find workers, a huge backlog of container ships crowds up the Pacific along the west coast.

October 1, 2021 - Vietnam ends it's weeks-long shutdown. Goods long delayed begin to flood out of port, further complicating the backlog in the U.S.

February, 2022 **The BIG One** - Vladimir Putin sends troops into Ukraine, kicking off a war which hasn't concluded yet. Because Ukraine is one of the largest suppliers of grain, this significantly impacts grocery prices.

March, 2022 - In response to Putin's war in Ukraine, huge sanctions are levied against Russia. Gas pipelines from Russia to Europe are shut down, leading to a massive energy crisis, especially for Germany, which was heavily dependent upon Russian gas. The economic impact on global prices is huge.

** More Supply-Shock and Cost-Push. By July of 2022, inflation has soared to 9%. I call this the "Putin Peak," because that inflation ties directly to Putin's stupid war. But honestly, given how severe the other supply chain shocks were, I'm surprised inflation wasn't much, much worse. It's a credit to Biden to have contained it so well.

From February to June of 2023 - inflation comes way down, eventually settling at around 3.5%. After that, it gradually ticked downward until it reached today's low of 2.1%.

WITH Putin's war in Ukraine still raging on! WITH Israel retaliating against the attacks on October 6, 2023, with an all-out war on Gaza!

Biden gets zero credit.

So, there's your instant replay. The two biggest factors in this are 1) Trump's mismanagement of the Coronavirus pandemic, and 2) Putin's war in Ukraine. Together with a bevvy of mishaps that were out of Biden's control, they are what was responsible for the inflation of 2021 & 2022. The fact that inflation remained low throughout 2023 and even lower in 2024 doesn't seem to have gotten anyone's attention at all.

Nearly two whole years of inflationary control. WITH two wars on!

In spite of this, Biden got all the blame. Trump, for all his clusterfucking, got the credit.

Because people didn't remember the clusterfucking. They remembered the stimulus checks.

That, and the Right-Wing Media Machine kept blasting falsehoods about everything from trans athletes to fake crime numbers for immigrants.

So don't ever let anyone tell you it was Biden's inflation. Biden did an incredible job in the face of some pretty damned steep obstacles.

History will record this, even if what passes for our current "news" media does not.

Eric

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