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Covid Hides Clouds on the Horizon

Irwin M. Stelzer

One of the less recognised effects of Covid-19 is the virus’s ability to so dominate the news cycle as to preclude attention to almost anything else. That is unfortunate, since there are three clouds on the horizon, and each is a lot bigger than a man’s hand.

The first is an explosion in the inflation rate. Yes, the Fed can’t even get it to 2%. But the government has replaced the traditional “b” with a “tr” to precede “illion”. Trillions in fiat money is being pumped into an economy already piling trillions in fiscal deficits on top of still more trillions in debt.

Those trillions are intended to boost economic activity by finding their way from consumers’ pockets into shops, travel, entertainment and the other stuff of modern life. The problem is that the ability of the economy to produce that stuff has been seriously impaired by Covid-19. Some businesses have shut down, never to restart. Others will have their productivity reduced by the need to socially distance workers — think auto and meat-packing assembly lines. So the new dollars will be chasing too few goods at a time when input costs are rising.

Read the full article in The Times

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