Don’t Blame Ukraine War for Inflation

The inflation problem is not because of the Ukraine situation.

AP/Nathan Howard
In Adelanto, California, supporters cheer on the beginning of a trucker caravan to Washington, D.C. February 23, 2022. AP/Nathan Howard

The Russia-Ukraine story has of course been dominating the headlines this week and we’ve been weighing in, but there are a lot of other problems going on in America. 

Our mantras: 

Save America, Kill the Bill. 

Save America, Kill Inflation. 

Save America, End the Fossil Fuel Jihad. 

Save America, Close the Border. 

Save America, let the parents run their kids’ schools. 

Save America, stop the woke CRT. 

Save America, back the cops. 

Save America, end the mandates. 

Save America, protect our national security.

By the way, according to the latest Gallup poll, one person who’s not seen as saving America is President Biden.

Only 41 percent approve of his job performance, only 40 percent back his foreign policy — and that drops to 36 percent on the Russian problem.

On the economy, Mr. Biden has a 37 percent approval and a 62 percent disapproval rating. That’s a new low for him on the economy.

Now, I’m always the optimist, because I think the cavalry is coming to save America, but we do have to wait until November.

In the meantime, we’ve got a lot of serious problems to deal with here at home, and we must not let the Putin-Ukraine story obscure that fact.

So, I noticed that CBS news came out yesterday and blamed inflation on the Ukraine crisis.

This is fake news from a dumb network. Because the invasion — this was no “minor incursion” — was Monday, while inflation has been skyrocketing for a year.

In fact, at the very end of President Trump’s administration, the 12-month change in the CPI was 1.4 percent. For the 12 months through this past January, it’s 7.5 percent. Incidentally, wholesale prices are up nearly 10 percent over the year, and import prices are up nearly 11 percent.

This is not because of the Ukraine situation.

Also, even in respect to oil, which is quite sensitive to the Ukraine story, the bounce in both crude oil and gasoline at the pump started way before Monday.

According to AAA, the national average for gasoline is $3.54 today. A year ago, it was $2.65. That’s a 34 percent increase.

Crude oil is $92; a year ago it was $63. That’s a 45 percent increase.

These are year-ago comparisons, not just in the aftermath of the Monday Russian invasion.

The root cause of Mr. Biden’s inflation problem is massive federal overspending, and Federal Reserve money printing.

No question energy prices play a big role in the inflation jump, but the price hikes are everywhere throughout the economy. As Milton Friedman taught us, inflation is always and everywhere a monetary phenomenon. That is, in shorthand, too much money chasing too few goods.

Over the past two years, federal spending has increased by roughly $6 trillion.

This of course has been financed through deficit spending, and the great enabler and accommodator of that deficit spending is our central bank, whose balance sheet increased by just more than $6 trillion. Basically, the Treasury sells bonds to finance the spending and the Fed buys the bonds in the secondary market and pays for them with new bank reserve money created out of thin air.

And all of those Fed purchases have supported a $4.7 trillion increase in the M2 money supply.

This nexus of deficit spending and money creation is the true cause of inflation. Not the Russian invasion of Ukraine.

By the way, one indicator that there’s still way too much inflationary money is the continued increase in broad commodity indices.

The continued rise in the CRB spot commodity index shows that neither the federal government nor the Federal Reserve have done anything yet to curb inflation.

In good faith, I’m more than happy to send this analysis to CBS News. I just need a key contact.

Again, we have many problems facing America: the catastrophic withdrawal from Afghanistan, the botched diplomacy with Ukraine, the jihad against fossil fuels, the more than 2 million illegals crossing the southern border, the tragic increases in crime and homicides, the failure to support the cops, the continued repressive mandates, and the parents’ ongoing battles with the teachers unions and boards of education to keep woke CRT out of schools — to name a few.

Here’s the really good news, though: I believe there is a populist revolt going on throughout the country, not unlike with the Tea Party of 2009. 

To some extent, it is symbolized by the truckers’ Freedom Convoys. But it’s spreading through every nook and cranny of the population. 

This is a huge rejection of big-government socialism. It’s also a huge rejection of woke cultural transformation.

Finally, it’s a huge rejection of Mr. Biden’s agenda and presidency.

Save America, the cavalry is coming.

From Mr. Kudlow’s broadcast on Fox Business News.


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