Fed Can't Stop Inflation Alone

Inflation is a complex issue that cannot be solely blamed on the Federal Reserve. According to Norman Rodewald, a contributing writer to the Los Angeles Times, the Fed's ability to control inflation is limited.

Rodewald points out that inflation occurs when there is insufficient production of needed products to meet demand. Currently, a major factor in inflation is the shortage of oil, which has driven up prices due to a lack of supply. Additionally, unnecessary tariffs on goods such as aluminum and tomatoes have contributed to higher costs.

The Fed's role is not to produce oil or reduce tariffs, but rather to set interest rates. However, even this tool has its limitations. As Rodewald notes, former Fed Chair Paul Volcker failed to stop inflation in the early 1980s despite raising interest rates. In fact, it was the increase in oil production by Saudi Arabia and the North Sea that eventually led to a decrease in prices.

Rodewald argues that the Fed's actions have contributed to other problems, such as the $100 billion bailout of the savings and loan industry due to high interest rates. He suggests that reforming Social Security and Medicare could also help alleviate shortfalls, including eliminating Medicare Advantage, which costs 20% more than traditional Medicare.