Domestically, workers have been scared out of their wits. Some are scared that if they go to work, they might catch the virus. Others are scared that if they take a vaccine their company is forcing them to take, they will experience dangerous side effects. So, they quit or get fired. Or they look for a different job. Or they call in sick.
The result is labor shortages. And as the supply of labor shrinks, its price—that is, wages—rises. Prices rise with wages—and workers, holding all the cards because of the tight labor market, demand more wage rises. We arrive at the same dynamics we saw in the 1970s, but via a different mechanism.
Once you understand it in this way, everything falls into place. The 38,000 care workers laid off in September and the flight disruptions, for example? Vaccine mandates creating chaos in the markets for health care and transport services. Indeed, if you look carefully at the state-by-state jobs data you can see that states with vaccine mandates have far more layoffs than states that have banned vaccine mandates.
Stagflation caused by massive interventions in the economy may not respond to standard economic medicine. This is not to say that the huge $3.5 trillion spending bill will not make things worse—it obviously will. But simply cancelling the bill will not stop the disruptions caused by lockdowns and vaccine mandates.
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