Slaying the stimulus scare-bug
Slaying the stimulus scare-bug
Supply chains, not government spending, caused inflation
As the pandemic raged, governments had to find ways to keep their economies afloat. Lockdowns meant businesses would collapse as they didn't have customers, supplies, or workers. That is unless they got support. Countries had to spend big to support companies and households or face calamity.
But some economists and pundits opine that this stimulus caused inflation. They argue that more spending meant higher prices. They're wrong. Lockdowns and supply chain problems, not deficits, made prices rise. And treating a supply-side problem with a demand-side solution won't work.
According to International Monetary Fund data, countries targeted different types and levels of stimulus. Some countries focused on spending more and taxing less. Others supported liquidity with loans, guarantees and asset purchases. Combining those shows that rich countries did more stimulus as a percentage of GDP than poor ones. America, for example, spent an extra 28% of it…