H O W A R D S B E N D

How is this for a bipartisan slogan, “Yes we can…Whip Inflation Now!”

The potential for runaway inflation has been brewing for a few years now as the federal government handed out trillions of relief dollars to individuals and businesses during the two years of the pandemic. At the same time, the Federal Reserve pumped trillions of dollars into the economy through its Quantitative Easing programs. The combination of these strategies has resulted in an additional $2 trillion in personal savings accounts that is creating excess demand just when inventories are depleted after the pandemic and supply chain issues have prevented these inventories from getting replenished. This is happening as gasoline prices surge due to the oil shortages brought on by the embargo of oil purchases from Russia.

The Democrats throw up their hands and claim that the confluence of these forces are out of their control……..a perfect storm of economic calamities. The country is looking for dramatic action and is not satisfied with the totally passive approach of letting the Federal Reserve slowly raise interest rates, promising only a economic slowdown, not a recession of a “soft landing” for our economy.

There are over 700 million barrels of oil stored in the Strategic Petroleum Reserve for emergencies. Joe Biden announced on March 31 of 2022, that the US would release 1 million barrels per day for three months to help ease the oil shortage. That amount is obviously not enough and Biden should look to release much more oil to glut the market and force the price of oil back down to more normal levels due to this excess supply. Biden is scared of offending the oil companies (as they experience record profits). Biden should also immediately drop the federal tax on gasoline at the pumps. Although this is only about $.30 per gallon, it will still help offset these soaring gasoline prices.

Biden should immediately go to China and announce that the Trump 25% tariffs will be removed from goods shipped to the US. This ill-conceived tariff was supposed to bring manufacturing jobs back to America. Realistically, these tariffs increased the cost of goods from China by 25% (inflationary) while moving manufacturing jobs from China to India, or Vietnam or some other low cost manufacturing country. Biden has been scared to end these tariffs as he fears Right Wing backlash for working with China and being depicted as a weak in our dealing with China. While meeting in China, Biden should offer to supply China with our Covid vaccines which have proven to be much more effective against the virus than the Chinese vaccines. I am sure that supplying China with 2 to 3 billion vaccines should help promote new pharmaceutical jobs here in the USA. Biden might use the leverage of providing China with vaccines to promote trade of other US industries into the Chinese market tat previously have been blocked by Chinese import restrictions.

The invasion of Ukraine had a six-month build- up. Our intelligence kept telling us that Putin would invade Ukraine so we had six months or so to prepare for the imposition of sanctions which would include embargo on Russian oil. The world, mostly Europe, would need a new source for 5 million barrels of oil per day. However, this preparation never happened. Iran is the most logical country for this replacement source of oil to Europe. All efforts should have been to re-start the nuclear non proliferation negotiations and find a framework to get a new treaty going forward that would bring Iran back into the global community while providing an additional 4 million of barrels per day for European consumption. I believe that the Biden administration was again afraid of Right Wing backlash from dealing with Iran and has let this opportunity slip away. It is hard to believe that a deal could not have been worked out given that a new treaty would benefit both sides. There was a previous deal to provide a structure and current sanctions are hurting Iran while at the same time the West needs additional supplies of oil.

Venezuela has over 300 billion barrels of crude oil in reserves making it thenumber one country with oil reserves. In the mid 1990’s Venezuela produced over 3 million barrels of oil per day. Today, after nationalization and mismanagement, Venezuela is producing one tenth of that amount. The US should be negotiating with Venezuela on a plan to revitalize this moribund industry so that it can help to contribute significantly to the world shortage in oil production and help relieve the pain and the inflation that the oil shortage is causing. But, again I believe, that this administration is scared to confront the Republican 1980 mentality that states that communism is evil and that we should be doing everything possible to keep Venezuela isolated from the world market.

Finally, we need to reverse the Quantitative Easing that put trillions of new dollars into the economy as the Federal Reserve printed about $80 billion per month and bought bonds on the market over several years. It is now time to reverse this process and sell these bonds on the market offering high interest rates to take much of that $2 trillion out of personal savings.

So much of inflation is fueled by expectations……people will go out today and make purchases if they believe prices will be rising rapidly in the future. This increases current demand. We must establish policies that convince the public that prices are leveling off so that there is no need to immediately go out and purchase these good. This obviously reduces immediate demand. Our government can start right now.