Opinion | Jerome Powell Is Completely Wrong. Inflation is caused by the printing of money. Federal Reserve Chairman Jerome Powell nonetheless believes that inflation and the cash provide are unconnected. He first made this outstanding assertion in his Semiannual Financial Coverage Report back to Congress final February, saying that “the expansion of M2 . . . doesn’t actually have vital implications for the financial outlook.” Since then, the U.S. annual inflation price has climbed to 7.5% from 1.7%, however Mr. Powell hasn’t modified his thoughts. He doubled down throughout congressional testimony in December, arguing that the connection between cash and inflation ended about 40 years in the past. The close by chart reveals in any other case.
By turning a blind eye to cash, the Fed has allowed the printing presses to run in overdrive. The cash provide as measured by M2, which is the Fed’s broadest measure of cash within the financial system, has been rising at document charges—with 39.9% cumulative progress since February 2020. M2 remains to be rising at an elevated, inflationary price of 12.6% a 12 months. Earlier than the pandemic, you’d have to return to the early Nineteen Eighties to discover a financial progress price this excessive.
