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Seven Words You Must Know

05 May 2022
By Andy Chen “TOO MUCH MONEY CHASING TOO FEW GOODS” This sentence with only seven words is the common description of demand-pull inflation, which by definition, is the upward pressure on prices that follows a shortage in supply. This is probably the seven words that best fitting the current US inflationary environment. With the shortage of energy supply caused by the recent Russia-Ukraine War, the supply chain woes during pandemic, worsening from China’s recent new covid lockdowns, and shipping along with extended delivery times and workers shortages at the ports on the US soil, the CPI index in the US has already accelerated to alarming rate of 7.9% in February and 6.6% in the year through March. But most importantly, the US Federal Reserve balance sheet has ballooned in size from USD0.6 trillion to the current USD8.9 trillion, almost 15 times since 2000, and meanwhile kept the borrowing cost at nearly zero for the past 14 years since the 2008 Global Financial Crisis.

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