Likewise, Obama’s healthcare reform, the Affordable Care Act, has hampered employment growth, as businesses reduce their hiring and cut workers’ hours to shelter themselves from increased labor costs (estimates of the rise vary). Meanwhile, the faltering European economy and slowing GDP growth in China and elsewhere are impeding export demand.
While subdued liquidity and credit growth are delaying the inflationary impact of the Fed’s determination to expand banks’ already-massive reserves, the US cannot escape inflation forever. The reserves that the Fed — and almost all other major central banks — are building will eventually be used.
Allan Meltzer is a professor of political economy at Carnegie Mellon University and a distinguished visiting fellow at the Hoover Institution.
Copyright: Project Syndicate