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What we need to know to fix US inflation
The recipe to fixing inflation depends on whether you see it as a demand or supply problem, economist and University of Chicago professor Austan Golsbee tells Ian Bremmer on GZERO World.
If inflation is being driven by too much stimulus, as economist Larry Summers believes, then the Federal Reserve is doing the right thing by raising interest rates to cool demand, Goolsbee explains. But if inflation is mostly due to the war in Ukraine or supply chain disruptions, rate hikes might result in stagflation.
US inflation is at a 40-year high and is therefore drives the perception among Americans that the economy is bad.
However, although real incomes have dropped due to high inflation, most Americans still have jobs, and many didn't take a big hit in their bank accounts — in part because the American Rescue Plan netted households an average of a $3,500 in tax cuts.
Note: This interview appeared as part of an episode of GZERO World with Ian Bremmer, "Explaining inflation & what's next for the US economy" on August 8, 2022.
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Explaining inflation & what's next for the US economy
US inflation is now at a 40-year high. So, what can we do about it?
The Federal Reserve is trying to cool down the overheated economy by raising interest rates. But if the Fed goes too far, the rate hikes could trigger a recession that'll hit low-income Americans hardest.
On GZERO World, Ian Bremmer speaks to economist and University of Chicago professor Austan Goolsbee, who says the recipe to fixing inflation depends on whether you see it as a demand or supply problem.
Goolsbee also shares his thoughts on why some COVID innovations like making masks domestically or WFH were just economic blips, why the Biden administration perhaps put up too much stimulus for the recovery, and why Americans feel glum about the economy yet still have cash in their pockets.
Bonus: find out why people are stealing CATS across America.