Hot Inflation Shocks Markets: The Worst Is Still To Come | Steve Hanke

Inflation is fundamentally a monetary phenomenon, driven by a money supply growth rate that currently exceeds the level consistent with a 2% target. With the broadest measure of money supply, Divisia M4, expanding at approximately 7.5%, the "inflation genie" is out of the bottle, manifesting in elevated Consumer Price Index figures. Professor Steve Hanke of Johns Hopkins University argues that energy costs, specifically diesel, create significant logistical bottlenecks that disproportionately impact agriculture and transportation. While some suggest price controls to mitigate rising costs, such interventions are counterproductive, merely replacing price-based rationing with time-consuming shortages. Although consumption remains resilient due to the wealth effect from stock market performance, real wages are declining, exacerbating public anxiety regarding affordability. Ultimately, inflation will persist until monetary policy shifts to slow the growth rate of the money supply.