U.S. Economy is Heating Up — Fed Faces Challenge of Managing a Soft Landing

Due to an unprecedented mix of expansionary fiscal and monetary policies between the first quarter of 2020 and the fourth quarter of 2021, the U. S. economy has entered a wage and price spiral, the likes of which we haven’t seen in decades. The rate of change in the M2 money supply (cash and near-cash) rose from the historical average of 7% to 17%. In the same period, the average quarterly change in total government spending jumped by an unprecedented rate of 27%. The combination of expansionary monetary and fiscal policy has led to the highest rate of inflation in four ...