Why have prices not skyrocketed in the United States if the government does not stop issuing dollars?

The United States economy records these months of pandemia something that scratches the category of inexplicable phenomenon

Increase money in circulation but prices do not upload.

And it is, for more than the US government has flooded the economy in recent months, inflation remains at moderate levels, something that calls into question a classic conviction of many experts economists.

In fact, the general price index was 1.4% in the last year. Although the money that circulates in the economy increased at least 25.8%, according to the Federal Reserve data.

That is, one in four dollars in circulation was created in the last 12 months.

Already with Donald Trump in the White House, the government opted for an expansive policy based on direct deliveries of money to families and businesses, the expansion of the monetary mass, zero maintenance of interest rates and the purchase of debt by the Federal Reserve.

His successor, Joe Biden, seems determined to maintain that policy and even deepen it.

Biden drives in Congress a stimulus plan of US $ 1.9 billion, which has led some economists to alert the risk of an increase in inflation and the consequences that would have for the recovery of the country.

But the question is rather why there is no inflation with all the money that has been issued in recent months.

The fear of inflation

Lawrence Summers, former secretary of the Treasury who occupied several senior positions in the governments of Bill Clinton and Barack Obama, recently published a column in the newspaperThe Washington Postin which he warned of the risk that the Biden plan disappoints "inflation pressures never seen in a generation."

And although the prices in general are stable, the truth is that there are certain markets that have experienced sensitive increases, such as the Street Street Street Street, where the SP500 index in the last 12 months has grown more than 15%, including just under 50% since it touched background in March.

“My business was growing and I wanted to scale markets and needed the help of mentors… We wanted to learn how the other markets behaved,” says Zamriver.

Or the real estate market, which has grown more than 11.6% in the country in the last twelve months, according to the housing price index prepared by the mortgage loan corporation known as Freddie Mac.

Steve Hanke, an applied economy professor at the Johns Hopkins University and a member of the Council of Economic Advisors of President Ronald Reagan, told BBC Mundo that "inflation is cooking, is just around the corner."

Hanke points out that there are already some upward prices that indicate an early change in trend, such as crude oil and other raw materials.

The zero interest rates policy, which seeks to encourage activity, also decreases the profitability of money deposited in banks, which is pushing large quantities towards the bags and towards higher risk assets, consequently raising its value.

Hanke predicts that "when inflation grows, the Federal Reserve will panic and will have to climb the guys, which will make many people lose money in the bag."

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But that is not what economists have said of another orientation or those responsible for the Federal Reserve.

Its director, Jerome Powell, said in a recent intervention that it is possible that there is a rebound in prices in the coming months, but ruled out that it reaches worrying levels.

If it passed, he said, the Federal Reserve would be "patient in his reaction", indicating that there would be no rise in the types immediately.

Powell's words show the prevailing conviction in Biden's economic team that the danger now for the US economy is not an inflationary spiral, but an insufficient recovery.

The way in which it is conceivedThe danger of inflation seems to have changed.

Paul Ashton, an analyst specialized in the United States of the Capital Economics consultant, points out that "even with all these stimuli may remain on the moderation path of recent years."

"Between 2016 and 2019, the US economy showed heating signs, with a very low unemployment rate, and still inflation was relatively modest."

In the same line, Gita Gopinath was expressed, the chief economist of the International Monetary Fund, who estimated that the Biden plan could push prices to an interannual increase of 2.25% in 2022.

"Nothing worrying," says the IMF analyst.

Why inflation is no longer the main concern

In the last third of the twentieth century, the memory of the effects of the 1973 oil crisis was much cooler, when the Government was unable to control the rise in prices.

But the behavior of prices in recent decades has reduced that fear, since they have maintainedsystematically below the 2% objective that has set the Federal Reserve.

That is, in the eyes of those responsible for designing economic policy, the problem has been more to boost economic growth than to slow prices.

The conviction that there is no imminent inflationary danger has been installed on both sides of the political spectrum, and now Republicans and Democrats are in favor of stimuli.

All that has encouraged the government to shoot with all its artillery after hundreds of thousands of companies closed and many Americans lost their jobs due to the coronavirus coup.

So nothing happens?

All economic policy has its pros and cons. The Biden government is not the first to face a serious crisis that forces it to set priorities.

The massive stimuli in the United States have helped to keep the economy alive, but at the same time they have increased the deficit of their commercial balance, the difference between what exports and matters, something that the Treasury Secretary, Janet Yellen, and in what China seems to be taking advantage, has shown concern.

Ashton explains that "many services such as bars and restaurants are still closed, and there are not too many imported products, while the electronic products that many have bought for teleworking usually come from Asia."

It is not the only risk. Ashton points out that if the increase in stock market assets "we could attend at the beginning of a bubble" in the markets.

But then he asks: "What is the alternative for the Federal Reserve? Increase interest rates and lead us to much greater unemployment?"

Yellen, a member of a generation of American economists marked by the roof of uncontrolled inflation suffered by the country in the 1970s, made clear its position in an interview with the CNN.

"I have spent many years studying inflation and worrying about inflation, but we face a huge economic challenge and a tremendous suffering in the country. We have to face that. That is the greatest risk"