Inflation and the Fed

Many people are wondering why inflation is happening now and the answer is that it is the accumulation of the growth in the money supply over the past 20 year and in particular the last 5 years. In 2008 the amount of money in circulation was $800 billion. By 2014 that had increased to $4.5 trillion and today it is $21.5 trillion. This is the result of the government creating money to solve problems like the 2008 mortgage crisis and the pandemic. When the amount of money increases faster than the things that money can buy the cost of items goes up. During the past 15 years that the fed has been creating money it has also held the interest rates down close to zero. The country danced and now is the time to pay the fiddler. The fed will have to raise interest rates which will slow economic growth which will likely lead to a recession. They will try to avoid this by raising the rates slowly to have what is called a soft landing but it will be a guessing game when it comes to how fast and how high to raise the rates.