Biden will pay a high price for bread and circuses

When the Roman writer Juvenal wrote the adage “of bread and circuses,” he warned the emperors that they must invoke such distractions to p...


When the Roman writer Juvenal wrote the adage “of bread and circuses,” he warned the emperors that they must invoke such distractions to pacify the peasants to accept bad rulers. This should worry President Biden – the price of bread in the United States has jumped 15% since the start of 2020, while a ticket to a modern circus, an NBA game, has soared 37% since the season. last.

There is real wisdom in the Roman cliché. Bread is a staple food and its cost often reflects world commodity prices. If it is not affordable, citizens throw crises and stones. In 2007, hundreds of thousands of people from Mexico to Bangladesh to Italy protested when the prices of breads, tortillas and pasta soared. But there is another point of wisdom in the price of a circus. In our modern day, the cost of a night out doesn’t just say something about entertainment, but the service industry as well, something the Federal Reserve and White House haven’t paid enough attention to.

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Some product price increases can be attributed to supply chain bottlenecks, but the service industry is less rooted in logistics bottlenecks. If service costs go up, it’s more than a temporary, isolated problem, like waiting for a late delivery truck. Ignoring service inflation has made the Federal Reserve and the White House ricochet against safeguards. Last month, the Institute for Supply Management announced that service inflation had reached its third highest level on record. The New York Federal Reserve said in November that renters expect a 10.1% increase over the next year, while parents expect college tuition to jump 7.4%. Please note that there are no container ships anchored offshore filled with studios or English teachers.

Until two weeks ago, Fed Chairman Jerome Powell viewed inflation as a “transitional” commodity shortage, while Biden continues to blame vague supply chain disruptions that he said it was too confusing for average Americans to fully understand. When as a candidate Mr Biden said that “Milton Friedman is no longer running the show” he should also have named Paul Volcker, the 6-foot-7-inch Fed chairman who waved a giant stogie as he explained to congressional committees the importance of beating the inflation of the Carter era.

I proudly admit that I was an inflation dove for a dozen years, until 2020. I stood up for Ben Bernanke, Janet Yellen and Mr. Powell as they fought the impact of the 2007-09 recession. In these pages and elsewhere, I have explained why the odd-job economy has helped contain inflation. But over the past year, the four pillars that help the economy resist inflationary forces have started to crumble.

First, a vigilant Fed. Put simply, the Fed printed too much money, with the core money supply catapulting twice as high as its previous growth path, an unprecedented experiment that injected an additional $ 4 trillion into bank accounts. The central bank’s $ 120 billion in monthly bond purchases, including private corporate bonds in 2020, overwhelm the credit system and distort markets, and this will continue even as the Fed gradually slows its pace. generous shoveling of cash.

This can perhaps be attributed to the rise of modern monetary theory, which is best viewed as economic astrology. MMT theorists have told government leaders they can engage in trillion-dollar printing business without hurting living standards. They simply had to cut spending (or raise taxes) if inflation started to rebound. But now that inflation has jumped, shouldn’t MMT enthusiasts be the first to argue for restraint? Let me know if you have any news from them.

Second, regulators and government lawmakers have reversed deregulation and undermined the odd-job economy, both of which are battling inflation. About a third of the U.S. workforce engages in concerts, as companies like

Airbnb,

Uber and logistics startup Curri are injecting a new offering in housing, transportation and construction equipment. More supply lowers prices. Many Democratic-led legislatures intend to classify giggers as employees. California has restricted freelance truckers (while the US needs more deliveries!) And even cut back freelance writers and artists. New York City capped the profit margins of food delivery people as

DoorDash,

which will limit competition and hurt city dwellers stuck in their cramped kitchens.

Third, world trade tends to keep inflation under control. Mr. Biden rearmed himself for his predecessor’s trade wars and skirmishes, making imports of lumber, natural gas, solar panels and electric cars from Canada more expensive. This has pushed up the prices of homes, heating and driving. The president could rightly use trade policy to deter

Vladimir Poutine

to threaten the Crimea or Xi Jinping to threaten Taiwan, but it is difficult to understand what danger he sees in our neighbor to the north, outside of hockey.

The fourth pillar supporting the economy against inflation – a firm dollar – remains in good shape. But this is not the proof of a wise American economic policy; it’s a sign that other countries are just as unhappy, or much worse in Turkey’s case.

Even on a firm dollar, the cost of bread and circuses continues to rise. Mr Biden and his party should be wary as the next election cycle approaches. Voters will not be happy with a political clown show.

Mr Buchholz is a former White House director of economic policy and managing director of hedge fund Tiger. He is the author of “New Ideas from Dead Economists”.

Wonder Land: Biden said, “I am a capitalist” and “I am not a socialist”. Here is why both claims are wrong. Images: Sport / Zuma Press Composite Image: Mark Kelly

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