Distinguishing Home ‐​Grown Inflation from Global Inflation

Alan ReynoldsEach country imagines inflation to be anational problem to be entirely blamed on national fiscal authorities or on each nation ' s central bank. Yet March CPI inflation averaged 8.8% for all 38 countries in theOECD, and 7.8% for the 27 EU countries.Economists at the Federal Reserve Bank of San Francisco, in theFRBSF Economic Letter, ask a narrower question: "Why is U.S. Inflation Higher Than in Other Countries?"  They first begin by acknowledging that there have been some uniquely huge global events driving world pricesdownin 2020 (COVID-19 lockdowns causing long-term loss of productive capacity) and other powerful forces driving global prices up since reopening in the Spring of 2021 – most recently the Russian invasion of Ukraine.From April 2020 to February 2021 most states and nations imposed strict COVID-19 restrictions shutting down substantial capacity in production and distribution that could not easily be reversed, leaving a legacy of supply bottlenecks in everything from oil and semiconductors to toilet paper, pork bellies, and truck drivers.After state and national economies reopened in the Spring of 2021, many prices snapped back from the pandemic-deflated base, contributing to big year-to-year percentage changes in monthly consumer and producerprice indexes.Texas crude oil, for example, jumped from $16.55 a barrel in April 2020 to $61.70 in April 2021.This year, the price ofWTI crude oil began rising quickly from $80 in early January asRussia began ...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs