The Jewish News: Alan Reinstein on "Inflation 101"
The Federal Reserve has begun to raise interest rates – in the hope of cooling off the economy – to slow inflation. You have noticed that prices are going up. Gasoline at the pump, fruits and vegetables at the supermarket, and more or less all other products, suddenly cost more money. That is inflation. Experts provide context for the factors that drive prices up. Alan Reinstein, CPA, George R. Husband Endowed Professor of Accounting at Wayne State University's Mike Ilitch School of Business, identifies a factor specific to the United States: deficit spending. "'For an extended period of time,' Reinstein observes, 'under both Democratic and Republican administrations,' the government has spent far more money than it has taken in taxes. 'The Federal Reserve increases the money supply to fuel deficit spending, feeding inflation,' Reinstein adds. Because, by definition, 'inflation occurs when too much money chases too few goods, thus raising prices,' the increasing money supply generates inflation."