How to end inflation:
Make the poor, poorer.
Meanwhile, protect the wealthy.
There is a double standard on "moral hazard."
Recessions end inflation. Business slows down. People get laid off, especially marginal workers at the bottom of the income pyramid. The Fed sees low unemployment figures and is continuing to raise interest rates. Unemployment is the lowest it has been in 55 years. Minimum wage jobs aren't getting filled until employers pay $15, $16, maybe $18 an hour. I see help-wanted signs everywhere.
It is never a good time to be a low-skill, low-experience employee, but this is as good a time as it's been since 1969. Back then, in my youth, the economy was supercharged by the government's Vietnam war spending. That combined with 500,000 young men being out of the job market because they were deployed in Vietnam. Millions more were out of the full-time workforce because they were sheltering in college to avoid the draft.
A recession this year will reduce the marginal demand for labor. The income those people don't make will reduce overall demand. That will send price signals through the economy. Banks will be more wary to lend, and that will further reduce the money supply. The poor get poorer so everyone else is better off.
There are other ways to pull demand from the economy. One is to raise taxes on the people who pay most of the taxes, i.e. the wealthy. This is in the control of Congress. The effect is direct, almost immediate, and targeted. Money that might be spent is used to reduce the deficit--a widely acknowledged public good. But that targets people with political power. That won't happen.
Americans are seeing a drama play out. The wealthy stay rich. The poor get poorer, and lectured. It preserves the current balance of winners and losers.
The Fed and FDIC just bailed out the large, uninsured depositors of two failed banks. Avoiding a banking crisis is a public good. But the depositor bailout raises the issue of "moral hazard." Some business depositors wisely (in hindsight) chose to bank with large, acknowledged too-big-to-fail banks like JP Morgan, which operate under tighter regulation, instead of smaller regional banks. They missed out on the corporate validation of banking with a specialized technology-startup bank. But now, all bank depositors, including JP Morgan customers, will be paying higher FDIC insurance costs. It is unfair. The improvident SVB depositors got something extra and undeserved.
I liken this to the student loan-forgiveness issue. There would be a generalized benefit by reducing the debt burden on millions of young adults. A generation of high school students heard the message that the way to secure their future was to get a college degree. Colleges sold the idea. Politicians agreed. Lose your manufacturing job, but don't worry. Just retrain. Go to college. Easy credit allowed colleges to raise rates. Congress made college debt non-dischargeable in bankruptcy. The trap formed.
Fifty years ago a young man could work his way through the most expensive college in America with summer jobs and part-time employment during the school term. I grew melons and fought forest fires in the summer and worked in libraries during the school year. Wages were good in relation to college costs. Not now. The least expensive regional colleges are less affordable now than were the most expensive private schools in 1969.
Yes, young people were improvident: They foolishly believed adults, the politicians, colleges, and labor economists. Conservatives make their values clear: It would be moral hazard to bail them out. It would be unfair to the people who did not go into debt. Besides, it would be inflationary, since the money going into interest payments would be directed back into the economy to buy things. But bailing out venture capitalists and giving tax breaks to the wealthiest--well that just makes good sense.
The double standard is real. It is the way of the world. That is why people call it systemic.
I too worked my way through college (state school, not Ivy) with summer and part-time jobs. Hit the streets of Chicago in 1971 with a shiny English Lit degree at 9am and by Noon I had 3 job offers. Entry level certainly but I could afford an apartment and some boards & cement block book shelves. The goal of every grad I knew was to attain an annual income of $10,000! Now I watch unlimited Congressional support for billionaires and kids strapped with 6-figure debt and little kids going hungry and I think no wonder they hate Boomers.