We struggle with inflation because we misread the pandemic
So, the economy was running normally until the government suddenly ordered us to lock ourselves in. Obviously, this will involve a lot of people losing their jobs and a lot of businesses losing sales. This will be a government-ordered recession. Because it was ordered by the government, however, the government knew that they had an obligation to provide workers and businesses with income to offset their losses. Fearing a prolonged recession, the government spent a lot of money and the Reserve Bank cut the official interest rate to almost zero. Illustration Credit: Matt Davidson Get? These were government-ordered restrictions on the supply of goods and services, but the government responded as if it was just a standard recession where demand had fallen below the economy’s capacity to produce goods and services and needed a major push to get them back up and running. The unemployment rate jumped to 7.5 percent, but the nationwide lockdown was lifted after just a month or two. Soon a