Inflation kills the economy
Woods and Wong 22 (Darian Woods is a host of The Indicator from Planet Money. He has an honors degree in economics from the University of Canterbury and a Master of Public Policy from UC Berkeley. Wailin Wong is a long-time business and economics journalist, host of The Indicator from Planet Money. “Economists consider the tradeoffs of fighting inflation and killing economic growth” interview with Alex Brazier, deputy head of the BlackRock Investment Institute, 9/30/2022. Accessed 6/18/2024. https://www.npr.org/2022/09/30/1126083834/economists-consider-the-tradeoffs-of-fighting-inflation-and-killing-economic-gro) wtk
WONG: First, the argument in favor of killing the bear - inflation is terrible for an economy. It makes people on fixed incomes poorer, and it makes it really hard for businesses and people to know how to invest because everything's so uncertain. Also, when inflation is high, it gets into people's psyches. And central bankers worry a lot about this.
WOODS: But Alex says central bankers, like Jerome Powell, are underplaying just how much pain there will be, like polar bear life-threatening levels of pain. And that's because there is another cause of the inflation today, the pandemic.
BRAZIER: We shifted the composition of our spending away from services and towards goods, reversing 18 years of change in the opposite direction.
WONG: Another reason - employers can't hire as easily as they used to. For one thing, there is a mismatch between what employers want and the skills that out-of-work people have.
BRAZIER: Effectively, people lost their jobs in the pandemic shutdown and didn't come back. And for all those reasons, the economy's less able to produce the things that it demanded than it was.