Mar
01

Impermanent Inflation

Biden’s proposed American Rescue Plan is large, almost 10% of GDP, and is a short-term, one-off event. Other similar historical events include the Korean War, at 4% of GDP, and, as far as the US is concerned, WWI at 13%. Neither of those events led to sustained inflation; inflation rose and then dissipated. Given that the economy now has substantial slack resources, it’s highly likely we’ll see an inflationary replay.

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