November 17, 2021

The Specter of Inflation – The New York Times

“With excess saving they can afford more of everything,” Jason Furman, a Harvard economist and former Obama administration official, wrote this week.

Although companies are increasing the supply of many products to satisfy rising demand, they may not always be able to keep up. One unknown, as Neil points out, is how many people have decided that they prefer the slower pace of pandemic life and choose not to return to full-time work. A lower labor supply could lead to more competition for workers and to wage increases that would translate into price increases.

If inflation remains elevated for months, it could feed on itself. Companies would increase prices, to cover the higher cost of raw materials. Workers would ask for wage increases, to maintain their buying power. The Federal Reserve might then need to raise interest rates to prevent an inflationary spiral, and rapid rate…

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