BUBBLE BURST

THOUGH IT MIGHT BE UNDER CONTROL, INFLATION SWUNG THE ELECTION. NOW IT COULD COME BACK.

- DAMIEN MARTIN

In the end, it was always inflation. Though inflation fell for six straight months before the U.S. election and at the end of September was at 2.4% — the lowest rate since March 2021 and near the Federal Reserve’s longstanding target of 2% — voters made high prices the top issue in re-electing Donald Trump to the presidency.

“Americans were comparing this economy to one without inflation, whether or not that was a realistic option according to economists,” New York Times reporter Ben Casselman said. “They weren’t saying, ‘Inflation is tough, but at least I have a job thanks to Biden.’ They were saying, ‘Of course I have a job, but now I have to deal with all this inflation thanks to Biden.’”

The phenomenon wasn’t unique to the U.S., and in hindsight, the result was probably cemented years ago. The world over, incumbent parties both liberal and conservative have taken big losses because of dissatisfaction over rising prices. Nearly five years on from the onset of Covid, inflation remains a lasting legacy.

A LOT, BUT TOO LATE?

Supply chain disruptions spurred by factory closures in Asia throughout 2020-21 contributed heavily to inflation as supply was tough to come by while demand for goods was rising. With restrictions on where they could go, people were home more than ever and buying goods more than services. Those goods took a long time to arrive and cost a great deal. The CARES Act of 2020 and American Rescue Plan of 2021 provided more than $4 trillion in economic stimulus, putting money in people’s pockets and staving off the worst in terms of recession or depression, but they did contribute to inflation.