Although little noticed by the media, a research report by Wall Street economists predicts a significant burst of inflation fueled by the “epic proportion of monetary and fiscal stimulus.” It warns that global economies are “sitting on a time bomb.”
The report is a stark warning that President Joe Biden’s $3.5 trillion tax and spending plan could return our economy to the double-digit inflation of the 1970s. And surely, also, the economic disruption that followed.
Released by Deutsche Bank Research, the report echoes other warnings from leading financial experts that Washington’s massive stimulus and debt was driving higher inflation and threatening economic growth. According to the report, the dramatic shift in macroeconomic policy taking place in Washington is “scary,” with inflation being downplayed while massive fiscal and monetary stimulus is being “coordinated in ways the world has never seen before.”
The report points out that “never before have we seen such expansionary fiscal and monetary policy” and that the “explosive growth in debt” will lead to higher inflation, leaving “global economies sitting on a time bomb.” When the Federal Reserve is finally forced to act, the tighter monetary policy “will be highly disruptive to the markets and the economy,” leading to a significant recession and “setting off a chain of financial distress around the world.”
This is the economic road map to ruin. Biden has set the fuse on a time bomb of inflation, debt, and financial disruption.
The budget resolution now before Congress calls for record-breaking levels of spending, taxes, deficits, and debt. It proposes $3.5 trillion in new spending, on top of the nearly $6 trillion already spent and the $1.2 trillion infrastructure bill. That is $10 trillion in new spending in 18 months.
Members of Congress can defuse the bomb. They must do so with urgency.
Bruce Thompson has served as a U.S. Senate aide, assistant secretary of treasury for legislative affairs, and as director of government relations for Merrill Lynch for 22 years.
