What Could Inflation Spell for the United States?
Introduction For the Weimar Republic, it was the aftermath of the First World War. For Hungary, it was the destruction caused by the Second World War. For Zimbabwe, it was the extremely poor macroeconomic policy and land reform acts that led to spiraling raw material costs. And for Venezuela, it was the volatile political climate and external sanctions. In all the above cases, the underlying trend has been a supply side shock that drastically reduced output, followed by the central bank’s desperate attempt at clogging the holes by printing money in excess to bring back the economy into stability. What followed, every single time, was hyperinflation that plagued these countries for years on end. It might concern U.S. citizens, then, that the Federal Reserve has chosen to combat the ongoing coronavirus crisis with expansionary policy. This trend has led economists to question whether troubled times are ahead for the U.S. as it recovers from the COVID-19 induced recession. Overview ...