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  • Victor C. Bolles

Joe Biden Didn't Cause Our Inflation

But he did make it worse

White House spokesperson Jen Psaki has been performing verbal gymnastics worthy of the Olympic gymnastics of Simone Biles trying to blame anyone and everyone except Joe Biden that today’s inflation in America is not his fault but theirs. She’s tries to blame rising gas prices at the pump on Putin’s invasion of Ukraine (while apparently forgetting to mention that gas prices have been rising even since President Biden shut down the Keystone pipeline and that he felt it necessary to release fifty million barrels of gasoline from the Strategic Petroleum Reserve in November of 2021 -long before Putin’s invasion - in a vain attempt to slow rising prices).

Ms. Psaki has also blamed corporate greed for rising prices and denounced the windfall profits of oil companies saying they are passing on these profits to shareholders and investors through stock buybacks and dividends. CNN followed Ms. Psaki’s complaint by pointing out a graphic on TV that showed four big oil companies (Exxon, Shell, Chevron and BP) had combined profits of $70.8 billion in 2021. The graphic failed to show, however, that these same four companies had combined losses of $69.9 billion in 2020. That’s a total profit of only $900 million for two years’ worth of effort. That’s equivalent to a profit margin of 0.06% on sales and a return on equity of 0.12%. If your 401(K) had that kind of return you would have been very upset. And as for the oil companies returning profits to shareholders, what else are they going to use the money for? Candidate Biden proclaimed on the campaign trail that, “We are going to get rid of fossil fuels.” So where else are fossil fuel companies supposed to put their money?

Had Ms. Psaki attempted to explain really why inflation is rising instead of trying to find someone to blame (other than Joe Biden) she might have gained some credibility (at the risk of boring her intended audience to death). She could have pointed out that inflation is a global problem, not just a US problem. She could have pointed out supply chain problems arising from the Covid-19 pandemic and various shutdowns around the world that have crimped the supply of needed goods. Russia’s invasion of Ukraine and China’s shutdown of Shanghai and other port cities have exacerbated inflation. But they exacerbated inflation that already existed.

Milton Friedman, a conservative economist ignored by the progressive left (at their peril), is famously quoted as saying, “Inflation is always and everywhere a monetary phenomenon.” And he was right! Look at this chart on the money supply from our good friend FRED (also known as the Federal Reserve Economic Data as compiled by the St. Louis Federal Reserve Bank ( For thirty years (from 1978 until 2008) the M1 money supply increased at an annual rate of about 4.8%. The Consumer Price Index for that same period averaged about 4.1%. From 2008 until 2019, the money supply increased around 9.9% a year, almost tripling in size. Monetarist theory would say that inflation should have increased because of the increase in the money supply. If you increase the supply of a commodity without an increase in the demand for the commodity, the price should go down. The growth in the money supply far outstripped the economy’s ability to produce goods so more money chasing limited goods should have increased the price of the goods, i.e., inflation. But it didn’t.

So, what happened? The increase in the money supply should have resulted in higher inflation. But it didn’t; for a couple of reasons. One, the method the Fed used to increase the money supply was to shove the money into financial institutions, especially banks. The idea was that the financial institutions would have to put that money to work by lending to people and companies and that these loans would increase economic activity and lower the unemployment rate, which was the goal of the Fed as defined by its dual mandate. But during the Obama years business and consumer confidence was low so nobody wanted to borrow money. So, the banks and financial institutions put the money into financial instruments, especially stocks. The stock market boomed. The rich got richer. GDP sputtered along (the new normal they said). Unemployment remained naggingly high.

The second reason was globalization. With high corporate taxes and oppressive business regulations from Obama administration bureaucrats, businesses felt that they could do better by manufacturing goods overseas with cheap labor. So, manufacturing declined in the US and imports exploded. Imports are a deduction from GDP, so GDP suffered, and all the employment gains were in China and other low wage countries like Bangladesh and Vietnam. Cheap imported goods helped to keep inflation low.

With stock market price/earnings ratios in the stratosphere, Bitcoin at over $40,000 a coin and nonfungible tokens selling for tens of millions of dollars anyone with even a marginal grasp of financial literacy would realize that we were sitting on top of a volcano.


So, inflation has been smoldering for many years under ground and hidden from view, and you can’t blame President Biden for that. But you can blame him for throwing gasoline on the smoldering embers that created the explosion of inflation that we are experiencing now. Of course, the first gasoline to be thrown on those smoldering embers of inflation were the Economic Impact Payments of $600 checks per person flamboyantly signed by President Trump. It was these cash payments by Presidents Trump and Biden direct to consumers that unleashed the latent volcano of inflation brewing beneath us.

The truth is that both Democrats and Republicans have been flagrantly violating the public trust for many decades. The Congress has only passed one budget authorization bill since 2010. We have been subjected to continuous continuing resolutions. Congress has only completed all the budget authorization bills on time before the beginning of the fiscal year four times in the last 45 years and the last time was in 1996. And President Biden’s most recent budget proposal would only increase the flood of gasoline on the fires of inflation (but luckily it has almost no chance of being passed). Presidential budget requests are now aspirational not practical.

And the Federal Reserve has been complicit in setting the fires of inflation by increasing the money supply by over 300 percent in just three months to over $16 trillion in an attempt to offset the impact of the pandemic. Not only that, but the Fed has increased the money supply by another $4 trillion since then, more than the entire money supply prior to the pandemic. But the Fed had already increased the country’s vulnerability to inflation by financing the government’s wanton spending since 2008 in a vain effort to create full employment as required by Congress in the Humphrey-Hawkins Full Employment Act passed in 1978 while stagflation was running rampant. Humphrey-Hawkins is based on a misapplication of Keynesian Theory that assumes continuous deficit spending by the government can increase GDP and reduce unemployment. The Fed has been struggling ever since to achieve the impossible objectives of its dual mandate (to achieve monetary stability and full employment). And as Congress gets more and more gridlocked by partisan infighting, more and more responsibility for the economic performance of the country has fallen on the shoulders of the Fed – a job that is not its responsibility and is beyond its capabilities.

The laws of economics don’t pause and take a time-out because Democrats and Republicans can’t agree. Inflation is firmly embedded in our economy and is not a transitory phenomenon that will dissipate before the next election. It is true that President Biden can point out that our economy has been faced with a perfect storm of black swan disasters including the pandemic, the invasion of Ukraine, rising Chinese authoritarianism and supply chain disruptions that have triggered an avalanche of inflation. These were not his fault. But his proposals for outrageous entitlement spending combined with a fantastical obsession about the possibility of green energy will only stoke more inflation while undermining our national security at the same time.

The Fed cannot fight inflation on its own. The President and Congress must act in the public interest to stop wanton spending, stop the growth of entitlements and start paying down the public debt or we will remain vulnerable to exogenous events beyond our control. If any of you remember the movie “The Perfect Storm” you will recall that the fishing boat was destroyed, and all the crew died (even George Clooney).

27 views2 comments


Mike Stellato
Apr 25, 2022

I love this.....So, in short, we are doomed!

How is your retirement planning holding up, Victor?

Victor C. Bolles
Victor C. Bolles
Apr 25, 2022
Replying to

Very well thanks. I reordered my 401(k) a while back in anticipation of a bear market and higher inflation (which I have been predicting for a while).

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