Econometry is a crucial appendix to America’s burgeoning macro [and micro] economy; a gospel amongst ambitious economists. In their eyes, “little else is requisite to carry a state to the highest degree of opulence” than “peace, easy taxes, and a tolerable administration of justice.” This foundational premise explains a lot of the econometry that occurs in global economics. In the developed nations of our world [i.e China, America, United Kingdom], “much of the macroeconomic action in the open economy is connected with its intertemporal trade, which is measured by the current account of the balance of payments.” Several aspects of this trade concern questions that economists have to consider to maintain the approachability of their countries’ fiscal environment. A country with ample savings and stellar HDI and GDP per capita will dictate whether or not the market values of its goods and services [consumption, investment, government expenditures] possess acceptable levels of inflation to maintain the reliability of future contracts and avoid bloating its debt to the point of a trade egress. Furthermore, econometry deals with the “welfare implications of international capital-market integration.” A country such as America, where foreign markets are prosperous, commands a free market/command economy and --duly -- will be characterized by high risk and reward aggregates induced by corporate investment, having a greater effect on the pull and push of fiscal tensions such as inflation. On a similar note, endowment economies are characterized by endogenous fiscal policies, where there is a heavy reliance on foreign supply. If that supply is cut off, that economy loses a major source of its economic output. For example, Iran’s oil industry is one of the largest contributors to its national wealth. Yet its nationalization of the industry has prompted it to turn towards import industrialization substitution [the incubation of domestic industries to compensate for an overreliance on imported goods]. Econometrics plays a significant role here: Excessive demand for Iranian oil has been met with a limited response by the government to meet it, with the “Iranian government-issued dollars appear to have run out.” Due to sanctions and the coronavirus pandemic, the volume of Iran’s non-oil exports has dropped significantly, commanding a 39% inflation rate post-pandemic, up almost 5% from September of 2020. The trend seen here contrasts the gospel of harmonized economics enthralled in fiscal responsibility; the bludgeoning of intertemporal economic markets with increasing levels of inflation rates. Notably, the U.S has experienced similar trends in its free-market economy, with rising levels of inflation resulting from persistent governmental spending and uncertain recovery objectives.    

A preliminary approach to inflationary turmoil is through an analysis of its causes. In the American economic sphere, there are two notable types of inflation: demand-pull inflation and cost-push inflation. Demand-pull inflation involves instances when marketable consumers have greater disposable income. Having more money to spend allows people to want more products and services. On the other hand, cost-push inflation involves the fact that when supply decreases, producers raise prices to meet the increasing demand for their goods or services. Both these inflation types revolve around significant models of fiscal management and expansionist monetary policies to aid policy-makers in hypothesizing their country’s economic trajectory. However, there are times when a fiscal crisis ravages the economic infrastructure of a country; in the case of the United States, the Covid-19 pandemic’s announcement all across the U.S almost immediately took its place as the tyrant of its economy. 

Fiscally, the Covid-19 pandemic has thrown economic recovery all the way to the American hinterlands, replacing it with a widespread, pandemic-induced inflation spectrum that has overshadowed devaluation and fixed-income rates. What results is a simultaneous confluence of supply and demand that bolsters a closure-less cycle of inflammatory inflation, agitating several notions of fiscal insecurity. This cycle’s characteristic anti-Chinese geomancy [fang shou] thwarts legislative efforts to reach a stage of economic stabilization to pre-pandemic levels, largely due to the U.S governments’ synchronized recovery with major healthcare industries such as Pfizer and Moderna to amplify vaccine rollout. Most notably, this recovery has led to a significant economic vacuum exposing decades of underinvestment in the global commodial infrastructure in addition to the vulnerabilities of “just-time inventories” inability to adapt to the magnitude of supply shock brought about by the pandemic. 

Covid-19’s persistent agitation of the American economy is not too dissimilar to economic disruptions in the past. The first period of high inflation was created in the period after WWII through “the elimination of price controls, supply shortages, and pent-up demand.” The second period of high inflation was created during the Korean War. As Americans rushed to fight in the Korean peninsula, “demand jumped as households—reminded of rationing and supply shortages during World War II—rushed to purchase goods.” Compounding this was the fact that “some consumer production shifted back to military material.” The third period of high inflation was created surprisingly not by a particular event but rather a “booming economy, which increased prices.” The fourth period of high inflation occurred in the 1970s. Lasting from 1965–1982, inflation rates rose a staggering 14%.  The problem was that the economy stalled at the same time, producing a fiscal phenomenon known as “stagflation” [stagnation + inflation]. Duly the Federal Reserve was in a tough position: If they lowered rates, inflation rates would be exacerbated but If they raised rates, the economy would inevitably become worse. Nonetheless, the inflation caused considerable damage to American citizens, drastically reducing their purchasing power. This effect was further magnified by the fact that it was caused by a mixture of an oil embargo by (OPEC) and a decline in oil production due to the Iranian Revolution and the Iran–Iraq War. The fifth period of high inflation occurred when Iraq invaded Kuwait and caused the price of crude oil to increase significantly due to heightened uncertainty. This led to a short period of high inflation [6%]. The sixth period of high inflation occurred in 2008 due to skyrocketing gas prices. According to White House.gov “One barrel of West Texas Intermediate crude oil cost more than $140 in July 2008 compared to $70 just a year earlier.”. The CPI rose above 5 percent for two months during that period.

Through an analysis of the last twelve months of the pandemic, the one-year changes in inflation metrics is as jarring as it is expansive. The economic shutdown that was put into effect in the latter half of 2020 compelled many U.S citizens to self-divest their own personal inclinations. Instead, necessities by way of toilet paper were purchased en masse; flights were suddenly canceled; the political sphere was forcibly thrust into addressing its misdemeanor in controverting the presence of Covid-19 in the U.S.  In essence, the world saw a large-scale usurpation of the status quo, especially in high-risk occupations save for those in healthcare which pushed millions of employees away and plunged stocks and corporations into a defamatory position as wage-based labor forces followed suit. A survivalist aurora [the compulsion to hoard monetary-based necessities to survive] followed, inflicting a widespread economic paralysis unable to compensate low supply chains such as Walmart and other grocery giants with the resources to meet persistent demand; more or less preventing them from planning an effective model of demand-pull inflation  

In several macroeconomic models theorizing inflation expectations [notably in the New York Stock Market], monetary decisions including consumption and saving are important variables analyzed by both policymakers and economic institutions in the preamble of a fiscal crisis. Predictions made are monitored in order to ensure “long-term economic objectives” within the status quo in order to avoid a disruption of economic progressivism [stock market plunges]. For instance, if forecasted trends for inflation begin to drift away from the U.S Federal Reserve System’s explicit objectives, a gulf of fiscal uncertainty could form, which may prevent a “central bank from achieving its objectives of stable prices and maximum employment.” In the case of the pandemic, economic trajectories were, in the eyes of the public, compliant with the current economic standards; yet the U.S government -- under the Trump administration -- concealed the presence of Covid-19 in hopes of avoiding public unrest. With economic institutions unmoored, the inflation crisis that loomed was “exceptional in many regards,” especially in the U.S’s response to it. Within a span of four weeks starting in mid-march of 2020, 22 million workers filed for unemployment, signifying a stark revelation of the government’s lack of transparency: economic un-preparedness. Soon after, “supply chain disruptions triggered by Covid-related shutdowns, the rising levels of government debt and the unprecedented expansion of the Fed's balance sheet put upward pressure on future inflation.” Many proposed, in prudence, that the American economy’s path to recovery would follow a K-shaped curve, where while one sphere of the economy recovered, the other would continue to recede. Ultimately, this proposal was largely evident throughout the pandemic: weak consumer demand for attractions inhibited by the pandemic [travel, leisure, hospitality] deflated inflation. On the other hand, rising government debt [through subsidies aimed at expanding supply chains] has indicated a waning elasticity in its ability to recover losse [Fiscal authorities note an emboldened American government that, at present, commands a “borrowing binge” of almost $19.6 trillion]. 

To decrease supply chain-induced inflation and ultimately, government spending, efforts have been taken by corporations to place emphasis on cost-push fiscal tactics. Economists describe this tactic as transitory: a business may pass on costs to consumers in the form of higher prices. Subsequently, even though the price of lumber or energy rises, it stabilizes at a higher level or decreases, with no further impact on future inflation [meaning that at some point, inflation levels will remain consistent as to influence no more excessive debt and further inflationary pressures on the economy]. In addition, the Federal Reserve Bureau set its economic standards to a targeted 2% inflation rate, prompting many businesses to consider a decreased tendency to adjust prices and wages in the light of the crisis, which could lead to an “inflationary overheating” and compel central banks to raise interest rates [thereby increasing unemployment]. However, these measures taken by businesses are adjunct to the U.S’s transition from “a shutdown economy to a post-pandemic economy.” The current expectation of a rise in demand for pent-up savings and relief funds [CARES Act] as well as leisure activities in profitable industries could motivate the public to buy high price tags, therefore over the next five years, witness markets that will meet the 2% inflation rate. Moreover, the federal government has implemented into its legislation notions of contractionary monetary policy The goal of this policy is to reduce the money supply within the economy. Its preliminary stages include increasing interest rates and then decreasing bond prices. Its later stages involve the government urging people to save more money as less money is there to go around, therefore signifying an important aspect of this measure: that reducing inflation is done by reducing economic growth. Juxtaposing the efforts to revamp effective economic conditions is an adjunct to the spending on research and development to investigate -- as well as mitigate -- the afflictions of the Delta and Omicron variants of Covid-19. 

The U.S government’s predisposition to excessive debt hinders its effectiveness to legislate well-meaning policies in a post-pandemic era mired with the ripples of the Covid-19 strain.  Pivoted by the dangers presented by the Omicron variant, countries with fully vaccinated populations are placing new vaccine orders — but only 6% of people in low-income countries have had one dose. This lack is a stark testament to the inefficacy of many high-income countries such as the U.S to effectively deliver on their promises of widespread vaccination in third world countries, mainly due to its [U.S] vast inflationary crisis that hampered the facilitation of vaccines when many of its own institutions and socio-economic industries were lagging behind in their strength of herd-immunity [and resisted vaccine efforts]. Specifically, COVAX, a pandemic-created corporation, envisioned vaccinating the world’s “most vulnerable populations” by the end of 2021. Yet, the goal was never met. The U.S government promised two billion vaccines to COVAX but has yet to deliver up to 15% of that philanthropic goal, highlighting that its inability to donate vaccines signifies its own misfortune with economic recovery. Its indebtedness from a vicious cycle of inflation hampers its ability to provide the necessary resources to deal with post-pandemic stresses. Compounding onto these ‘cracks in the provisional recovery process’ is the lax federal response in the U.S to respond to the Omicron variant by way of loosened travel restrictions, thus strongly predicted to hurt “consumer spending and worsen labor shortages and supply chain bottlenecks, intensifying already- high inflation,” as well as cut economic growth next year by half a percentage point to 4.3% and lead to the creation of several hundred thousand fewer jobs.”  The Omicron variant’s presence in the U.S may undermine the tight fiscal policies and reserve requirements that have characterized a slow progression back to economic recovery, also underscoring the U.S government’s impact by high inflation rates in its effectiveness to herd citizens back to employment in lucrative industries, ultimately revamping a lethargic economy to recover from its deficits and reach a steady economic growth pattern without any of its previous inflationary tendencies. 

Notable economist Milton Freedman once said, “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.” He proposed that in order to control inflation, the central bank [i.e Federal Reserve] would have to set targets for inflation. To ensure that the targets were met, the banks would have to raise their money supply by a specific percentage every year, regardless of the economic trajectory of that year. Coined by Freedman as the K-percent rule, it inhibits the Fed any “leeway when making monetary decisions” and prevents any “mistakes and excessive monetary responses to economic conditions.” By preventing these ‘fiscal taxes,’ inflationary stages would soon reach monetarily acceptable levels. In the case of the United States, the creed which economists follow to quantify economically desirable levels pertains to the idea of anti-inflationary measures against fiscal crises. The pandemic repressed the dynamic of our free-market economy, restricting business ventures, net profits, and purchasing power, forcing the federal government to lend money to subsidies to restore damaged supply chains. Several proposals for the rising levels of inflation [due to unemployment] compelled businesses to adopt economic guidelines and policies that would de-stress the economic tension. As such, in retrospect, America’s inflationary tendencies fell and rose in an ensemble of mediocrity; not progressively profitable enough to engage its pre-pandemic levels of international activity.  Yet recent econometric efforts have allowed America to begin the process of realigning itself with its economic virtuoso, weighing both fiscal responsibilities and progressivist policies with the inevitability of future financial crises. 

CITATIONS

SCHOLARLY CITATIONS/BOOKS:

Armantier, Olivier, et al. "How economic crises affect inflation beliefs: Evidence from the Covid-19 pandemic." Journal of Economic Behavior & Organization 189 (2021): 443-469.

Appiah-Otoo, Isaac. "Does COVID-19 affect domestic credit? Aggregate and bank level evidence from China." Asian Economics Letters 1.3 (2020): 1-5.

Seiler, Pascal. "Weighting bias and inflation in the time of COVID-19: evidence from Swiss transaction data." Swiss Journal of Economics and Statistics 156.1 (2020): 1-11.

Dietrich, Alexander, et al. "News and uncertainty about covid-19: Survey evidence and short-run economic impact." (2020).

Davari, Hamid, and Alireza Kamalian. "Oil price and inflation in Iran: Non-linear ARDL approach." International Journal of Energy Economics and Policy 8.3 (2018): 295.

Abounoori, Abbas Ali, Rafik Nazarian, and Ashkan Amiri. "Oil price pass-through into domestic inflation: The case of Iran." International Journal of Energy Economics and Policy 4.4 (2014): 662.

Forbes, Kristin J. "Has globalization changed the inflation process?." (2019).

Kabukçuoğlu, Ayşe, and Enrique Martínez-García. "Inflation as a global phenomenon—Some implications for inflation modeling and forecasting." Journal of Economic Dynamics and Control 87 (2018): 46-73.

INTERNET SOURCES/REFERENCES: 

Debt and Inflation: A Lesson in Economic Interactivity
First omicron variant case discovered in United States in California.
What Are the Causes of Inflation?
Oil, the dollar and inflation: How far can the economic crisis in Iran go
Omicron: the global response is making it worse
Progress Quotes (1854 quotes)
Hot November inflation report was probably the best the White House could have hoped for at this point   
The part played by natural resources in addressing the COVID-19 pandemic in Latin America and the Caribbean | Insights | Economic Commission for Latin America and the Caribbean
Pandemic Prices: Assessing Inflation in the Months and Years Ahead  
Historical Parallels to Today's Inflationary Episode
How the Great Inflation of the 1970s Happened
K-Shaped Recovery