The US economy has faced numerous problems during the last two and a half years—from a pandemic, to rising inflation during a new geopolitical crisis. With Vladimir Putin’s Russia launching an unjust war in Ukraine, and no end to that war in sight yet, experts are left wondering what the chances for economic recovery are in 2022. While growth was possible after the COVID-19 pandemic with its effects on world economies, economic revival currently seems like one of the toughest goals to achieve.
One of the primary reasons for the difficulty of this task is the fact that the global economy is now facing rising inflation. Fueled by supply chain disruptions and pent-up consumer demands for goods, inflation is a problem that affects not only industries, but also end consumers. As the prices of goods and services continue to increase, shoppers in the US and abroad are unable to buy desired items. This causes a decline in business profit, which leads to new problems for an already crippled economy.
Is the fight against inflation during a geopolitical crisis easy to win? Experienced economists and policy-makers are still considering the answer.
Contributors to inflation
According to President Joe Biden, there are two important causes of inflation that is still disrupting the American economy. The original cause of inflation is without a doubt the COVID-19 pandemic that changed the way people around the world live, work and shop. The second cause of inflation is Russia’s unjust war against Ukraine. The conflict has led to increases in global food prices due to Ukraine and Russia being two of the world’s major producers of wheat and corn.
Moreover, energy prices also boomed as a consequence of the conflict, and there are concerns that oil and gas supplies from these two countries could dry up due to military activity, Western sanctions, or Russian retaliation. According to The Wall Street Journal, economists believe that it is unlikely that these prices will drop to their previous levels this year. The prices could continue to increase more with the current sanctions in place. According to the economists, this will cause inflation rates to remain high for longer than anticipated. However, American policy-makers believe fighting inflation is possible.
President Biden’s plan
According to the President, one of the problems with fighting inflation is the fact that the two major contributors to it are both global forces. “Here’s the good news: Because of the actions we’ve taken, America is in a stronger position to meet this challenge than just about any other country in the world,” President Biden said. The Federal Reserve, Congress and the President can also take decisive action against inflation by keeping the prices stable.
According to the President, his plan to fight inflation begins with lowering everyday costs for American workers and their families, while also dropping the deficit by asking large companies and the wealthy to pay their fair share in taxes. “My plan is already in motion. I led the world and other countries to join with us to coordinate the largest release of oil from our stockpiles of all the countries in history—240 million barrels to boost global supply,” the President added. Not only is US oil and gas production now approaching record levels, but the Biden administration is also planning to approve the sale of gasoline using homegrown biofuels in order to reduce Western dependence on Russian oil.
While The Federal Reserve remains committed to taking all the necessary measures to reduce inflation, journalists and experts are left wondering if these actions could cause a debt crisis abroad. While the US is likely to win the fight against inflation, as well as against further negative effects of Russia’s war in Ukraine, other economies are more exposed to the current problems. However, winning the fight may prove to be complicated, even for Americans. “This will not be my only speech on inflation, I’m sure. But when you look at the economy today, it’s clear that we’ve made enormous strides,” President Biden said. The effects of all these efforts are expected to reshape economic recovery soon.