Deutsche Bank released a report that further confirms a portent of doom for the U.S. economy and Democrats led by President Joe Biden. While many economists and policymakers claim that the recent uptick in inflation is temporary, Deutsche Bank warned that Biden’s profligate spending, the Federal Reserve’s low interest rates, and global economic trends threaten to unleash persistent inflation, which amounts to an insidious tax on the poor and middle class that benefits the government.

“Few still remember how our societies and economies were threatened by high inflation 50 years ago,” David Folkerts-Landau, Deutsche Bank chief economist and head of research, wrote in a paper co-written by his colleagues Jim Reid and Peter Hooper. ” The most basic laws of economics, the ones that have stood the test of time over a millennium, have not been suspended. An explosive growth in debt financed largely by central banks is likely to lead to higher inflation.”

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“We worry that the painful lessons of an inflationary past are being ignored by central bankers, either because they really believe that this time is different, or they have bought into a new paradigm that low interest rates are here to stay, or they are protecting their institutions by not trying to hold back a political steam roller,” Folkerts-Landau added. “Whatever the reason, we expect inflationary pressures to re-emerge as the Fed continues with its policy of patience and its stated belief that current pressures are largely transitory.” . . .

“Already, many sources of rising prices are filtering through into the US economy. Even if they are transitory on paper, they may feed into expectations just as they did in the 1970s. The risk then, is that even if they are only embedded for a few months they may be difficult to contain, especially with stimulus so high,” the authors warned.

The Federal Reserve, acting on the assumption that current inflation trends are temporary, may be too slow to damp the rising pressures on inflation, Folkerts-Landau warned. “The consequence of delay will be greater disruption of economic and financial activity than would be otherwise be the case when the Fed does finally act. In turn, this could create a significant recession and set off a chain of financial distress around the world, particularly in emerging markets.”

Inflation is a serious threat, and Biden’s policies have made it more likely.

The core personal consumption expenditures index — which Federal Reserve officials consider the best indicator of inflation — rose 3.1 percent in April, above the 2.9 percent economists predicted. The Fed considers 2 percent to be healthy, although it will allow the price index to grow in the interest of promoting full employment. Unfortunately, unemployment remained above 6 percent in April despite economists predicting that it would dip below 6 percent.

This persistent unemployment should not surprise Americans who are familiar with the Democrats’ $1.9 trillion blue pork bill masquerading as a “COVID-19 relief” stimulus. Only 8.6 percent of the funding went directly to combatting the pandemic, while hundreds of billions went to blue-state bailouts. The bill also sent $1,400 checks to individuals, and extended the $400/week “enhanced” unemployment benefits.

Thanks to this “enhanced” unemployment, many workers make more money without a job than they did when they had one. Rather than reconsidering this perverse incentive not to work, Biden and his fellow Democrats further entrenched it.

Biden’s other policies would also make the economic situation worse. The president has called for Congress to spend trillions more in social programs that his tax plans cannot hope to fund. Essentially printing money decreases trust in the U.S. dollar and sparks inflation.

The Deutsche Bank report gave two other macroeconomic reasons to expect inflation.

First, over the last 40 years, the integration of China and other emerging markets into the global economy has meant that hundreds of millions of cheap workers entered a globalizing workforce, putting downward pressure on wages and prices. Yet in the years and decades ahead, the working-age population will decline across the globe. This scarcity of workers will press wages up and increase the prices of goods and services.

Secondly, the COVID-19 pandemic has shocked many countries into realizing the weaknesses of their supply chains. “The desire for resilience means there will likely be a bias towards investment in home production, especially in critical sectors, such as personal protective equipment, drug manufacturing, and semiconductors. The likely result is higher production costs. These will eventually be passed on to the consumer,” the Deutsche Bank authors wrote.

Some inflation may represent an overdue correction to unsustainable global trends like these, but Biden’s profligate spending and his woefully inadequate tax plans will only worsen the situation.

As PJ Media’s David Goldman wrote, “inflation is an insidious tax that robs the poor and the middle class. It favors the U.S. government, the world’s biggest debtor, because the government expects to pay back its creditors in Monopoly money. It crushes the real earnings of the vast majority of American households and destroys their savings. That’s what the Democratics are up to. And that’s what might bring them down–just as 12% inflation brought down Jimmy Carter in 1980.”

Unfortunately, inflation will bring down the U.S. economy along with the Biden Democrats. America needs tighter economic policy in order to fight inflation. That may call for another Reagan-style revolution.

What are your thoughts on the report that the Deutsche Bank released? We need to pray that our economy will stay strong. Write your prayers and thoughts in the comments below!

(Excerpt from PJ Media. Article written by Tyler O’Neil. Photo by Tim Evans)

For more helpful information about inflation and how it effects the economy click this link.