Supply-side policies would solve inflation -- without the bank-system damage

The alternative is an economy that meets or over-supplies goods and services. Such an economy is disinflationary because it drives competition and thereby lowers prices. Economists like to point out that such supply-side solutions are “time-consuming to implement.” They are. So too are the effects of rate hikes. As Congressional Research Service economists wrote recently, it can take “from 18 months to several years for the effects of Fed policy changes to feed through to inflation.” …

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The magnitude of the headwinds the Fed faces will be determined by those “other things.” What could be done to systemically increase the supply of goods and services? Three factors produce abundance: cheap energy, stable and efficient regulations, and access to risk capital. Unfortunately, policymaking trends point away from those goals.

Start with energy.

[I have argued this for the last year, at least. In fact, I even explained this in today’s VIP Gold chat with Cam Edwards before I saw this essay. I noted today that when even the hard-left American Prospect calls for supply-side policies to address inflation, Democrats should have taken note. — Ed]

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