Today's Top Stories From the Breitbart News Desk

Treasury Secretary Janet Yellen told CNBC on Thursday that the United States is likely to see "several more months" of high inflation—but no more than that. This is essentially the same tune that the fellow who has her old job of Federal Reserve chair, Jay Powell, told a Senate panel on Thursday and a House panel the day before. While we are not claiming anything untoward is going on here, it is a bit jarring to discover that the chief economic officer of the Biden administration and the head of the supposedly independent central bank are not just singing from the same hymnal but have 'independently' alighted on exactly the same page.

The ever-present danger of elites is that their members tend to follow each other's thoughts too closely. It's usually the safer course to repeat the mantra than strike out on your own. If the mantra turns out to be wrong, you are just one official among many who got it wrong. If you are right, you can claim credit for prescience. So actual independence is quite rare in Washington, Wall Street, or the executive suites of corporate America.

The inflation doves have not yet come up with a clear explanation for why we should trust that inflation will be transitory. On Wednesday, Powell asked us to have "faith" that the central bank could crush inflation when it chooses. On Thursday, there emerged a new tactic: challenging inflation hawks to explain why high inflation would continue. In the words of Tim Fernholz of Quartz, "inflation hawks still lack a clear narrative that explains how this high rate will become permanent."

We'll take that as an invitation to briefly make the case in three parts. The first part is about demand. Although we've clearly passed through the economic crisis of the pandemic, the Democrats are still hatching plans to launch trillions of dollars of new spending programs. On Thursday, Yellen told National Public Radio that she favors making the new child tax credits permanent, which alone would mean around $100 billion of new spending each year. And there will be pressure to expand these programs to "keep up with the high cost of living," which is to say to raise the level of spending because of the inflationary pressures by the spending level in the past.

The second part is about supply. The Green New Deal's war against carbon will likely constrain supply of many goods as production becomes more expensive and use of goods and services costlier. Higher taxes diminish investment incentives, lowering production over time. High levels of benefits decrease incentives to work. And an aging population will subtract from the labor force in the years ahead. Demand for human rights and environmental concessions from China—although whether these will stick remains doubtful—will also reduce supply of goods, at least in the near to medium term.

The third part is about monetary policy. Under the direction of Powell, the Fed has not-so-quietly adopted racial equity as a third mandate under the rationale that we will reach maximum employment until racial disparities in employment are largely eliminated. Whatever one's opinion of this as a goal of monetary policy, it certainly means that rates will stay lower for longer than they would have under a central bank that left such matters to the political branches.

So there you have it. The combination of increased demand, constrained supply, and an equity-oriented central bank could push inflation higher for quite some time. We cannot say for certain that this is how thngs will unfold—Biden could buckle on China sanctions, for example—but it does at least demonstrate that there is indeed a "clear narrative" that explains how a high rate of inflation will stick around longer than the chorus of Yellen-Powell would lead you to expect.

– Alex Marlow & John Carney
Breitbart News Network