While there is consensus, even at the Fed, that they left the spigot of monetary stimulus wide open too long resulting in inflation, they did achieve their aim of restoring the economy from the COVID pandemic near collapse, avoiding that catastrophe. Most have forgotten about that now, with complaints over the problem presently being faced of inflation and what it will take to quell it. The Fed and the Federal government committed both monetary and fiscal stimulus to bridge the pandemic-plunge in the economy keeping the wheels from flying off. They pushed trillions of dollars into the money supply, which kept the engine of our economy running and churning so that the recession was as shallow and brief as possible. It worked, and their reward is that now they are being treated as “the bad guys” because the medicine went too far in giving the economy a sugar high. The Fed admits that and has aggressively increased interest rates at the fastest pace in history. Are they making another mistake that will correct the first or only compounding their original error? It will take time to determine that answer and I am not jumping to conclusions.

What kind of inflation is this? We now know that it was not “transitory” as the Fed said that they once believed. I have seen inflation before, having gone through it in the 1970’s and I do not think that it is that kind of inflation either. I do not see this inflation compounding at the recent annual rate like it did in the 1970’s. The Fed has responded very aggressively and gotten on top of the problem. Some fear too aggressively. In fact, the rate of inflation is slowing according to the WSJ. They say that the 4-month annualized CPI inflation rate is just 2.8%. We have noted that the interest rate has historically had to go above the inflation rate before inflation was quelled.

The Fed is on its way to 5% (or higher) which is above 2.8%. Year-upon-year … month-upon-month inflation would appear to be slowing down. I think that this inflation could turn out to be more of a COVID-pandemic recovery price adjustment than a perpetual sort of thing. It might be too far to go to call it a one-event price hike, but that is possible. That is the Fed’s objective while not creating the deep recession with tightening that it avoided during the short-term pandemic collapse.

The Biden administration gets blamed for inflation because they are the ones in office while it happened. In my opinion, monetary policy trumps fiscal policy so the Fed wielded the bigger hammer. The Fed gets blamed first. The Fed wanted Congress to push fiscal stimulus in concert with theirs. Congress delivered with PPP, unemployment extensions, stimulus checks and so on. The “so on” included infrastructure spending that was needed. The Dems tried to take advantage of the crisis to push their social agenda but frankly were largely unsuccessful thanks to a couple Democratic Senator holdouts which trimmed their spending plans by a trillion dollars or so. The spending that was approved was the result of compromise and, all things considered, I do not take great issue with what was done. You can get into the minutia about how all of this should have been handled differently but as far as the government goes this was about as competent as they are ever going to get. The government erred on the side of doing too much to help the economy rather than too little.

One positive from the economic stimulus is that in spite of previous tax cuts, government tax revenues were up 21% in 2022 versus the previous year.

Supply side economics appeared to work. Farmers shared in this as bankers tell me that many have paid off their lines of credit. Farmers are as shored up financially as they have been compared to most times in my 50-year history of farming. Stability in farmland values appears to reflect that. The stimulus spending generated a $2.8 trillion fiscal deficit in 2021. When the economy is going to hell that is when fiscal stimulus is justified. The CBO says that the fiscal deficit for 2022 will be $1.4 trillion, cut in half. I do not want to make that sound like a good thing as adding trillions in annual deficits add up to real money. The country owes $31 trillion, a big number. I am not advocating for larger deficits and more debt, but frankly the country could afford this. U.S. GDP is real, generated by solid commerce, un-appareled structural advantages, growth producing demographics and a global reserve currency. On my trip through the South in late October, I saw 2,000 miles of a thriving strong economy. All of our problems are about policies while the foundation of this country is still bedrock. Solve some of our policy differences and quit hating one another and the country would be a juggernaut. Ideological differences conflict with the truth of America being the envy of the world.

No other major economy — neither Japan, the EU, South Korea and certainly not China — compares competitively to the U.S. For the first time since 1976, the 2022 U.S. GDP is projected to grow at a faster rate compared to China’s GDP.

According to the Bloomberg Report, the U.S. GDP is expected to grow at a rate of 2.8% for 2022 while China’s falls behind at 2%.

So, can we solve this inflation thing? I think so … or at least put the flames out. That is, of course, if no other calamity befalls the state of global conditions, which may be too much to ask. We have wars and rumors of wars. Given resolve, we can win those too. The U.S. is moving to make itself more independent from global supply chains, but that is not going to happen overnight. It was time to redirect our strategic economic security interests, such as chip manufacturing, but we do not want to go overboard with protectionism either. U.S. Agriculture is currently a thriving, tech-adopting, productivity-rising, exquisitely (careful choice of a word) capitalized economic entity that is climbing a wall of worry. I have no doubt that a higher lofty summit for our industry is far above where we are today. Never bet against U.S. Agriculture. Never bet against American economic resilience.

Whatever kind of inflation that this is, we will deal with it.