Peach Tree Times

Decisions by the Biden administration, the Federal Reserve Bank and commercial banks will determine how devastating inflation may become, a Georgia Tech economics professor told the Peach Tree Times.

The continuation of dramatic spending sprees by the Biden adminstration, and the Fed sustaining a low interest rate and high money growth policy set the stage for serious and probably devastating inflation, Christine Ries, professor of Economics at Georgia Tech and senior research affiliate at Georgia Public Policy Foundation, told the Peach Tree Times. The nation's banks have played their part as well, Reis said, soaking up Fed money without an increase in lending.

"Inflation is on a medium boil and will overflow the pot depending on the decisions of the Biden administration, the Federal Reserve Bank, and the practices of our commercial banks," she said.

The Biden administration's dramatic spending sprees could help push inflation to devastating levels, an economics professor said. | facebook.com/POTUS/

"The fundamentals are in place for very serious inflation. When our banking system ramps up lending, the only outlet is inflation – and lots of it," Ries said.

If the current tax and spending laws don’t change before the next decade, the U.S. National Debt will reach 107% of Gross Domestic Product (GDP), the highest level in US history, the Congressional Budget Office reported. The same report also said that the current federal debt, 100% of the U.S. GDP at the end of the fiscal year 2020, is projected to reach 102% of GDP by the end of 2021.

"As we recover from the pandemic, inflation is projected to rise from its 2020 low of 1.4% to nearly 2.3% or more. That’s a 60% increase in inflation. However, we know that if Congress continues to spend and do nothing about our growing debt, inflation will rise even higher," Sen. Rick Scott said in a letter to his Congressional colleagues.

Former Clinton administration Treasury Secretary Lawrence Summers warned the recent economic stimulus passed by the Biden administration will likely “set off inflationary pressures of a kind we have not seen in a generation.”

"As Milton Friedman famously and correctly stated, 'Inflation is always and everywhere a monetary phenomenon'," Ries said.

Inflation means the general increase in all prices – in the price level. The increase in gasoline or food prices is not inflation but are price increases. Those price increases are due to other factors, Ries said.

"Many of these price increases are due to specific factors and will be short-lived. These include poor forest management practices (lumber and housing prices), shutting down the Keystone Pipeline (gas prices), disruption in and recovery of supply chains due to pandemic (food, computer chips and many others)," she said.

In May, shopping app developer Shopkick released results of its survey of 19,000 consumers that found 83% reported they are tightening their budgets over the threat of continued inflation. The survey also found that 54% of the consumers surveyed reported being very concerned about inflation and 86% said they'd experienced price increase on everyday goods.