Inflation predicament

I have been saying for months, if not for more than a year, the Federal Reserve (FED) would not be able to solve inflation. A guy at my office said, "Ya Marc, you have been saying that but now we have the Middle East conflict/war and that's the reason." True, but calling inflation to continue was based on many factors, and some of those factors ring true in the words of Donald Rumsfeld, U.S. Secretary of Defense, in 2002, speaking about weapons of mass destruction: "There are known knowns and there are unknown unknowns …" Not his exact words, and a weird combination of them, and it had nothing to do with inflation, but his word salad has many applications, and the current inflation is one of them. True, I did not mention a possible war as a reason for our inflation that would not go away. But much like a forest full of dead wood, no one knows what will start a fire, but in an overgrown forest, something would. The same holds true with my inflation prognostication. Although I mentioned deficit spending, the egregious Covid bailout money and the interest rate hikes and reductions that would together be an unsolvable combination, a healthy economy that did not possess this combination of contradictory problems would probably not be as affected with the advent of war when it came to starting an inflationary fire. That said, we will never know just how our inflation would have reacted had we not had these previous economic issues, I am of the opinion our inflation would have not dissipated even if we had no war. It all centers around the price of oil, of course, but like the forest full of dead wood, it wasn't a hard call to say inflation would not go away and likely get worse no matter what happened. The war has just exasperated an already bad situation. Oil is used in many of the things we consume, and spiking in price, as it is now, something even more wicked comes our way. Even if the war ended tomorrow, the proverbial cake is already baked. Oil has spiked, and its effect is in the pipeline. The problem is now, what does the FED do about it? Inflation abatement requires higher interest rates and tighter credit. A faltering economy where consumers are struggling with already high prices require lower interest rates and looser credit. So what is the FED to do? We are right back to the conundrum they were going to have to face eventually, only on a grander scale. Even higher prices are coming. There is no avoiding it. More consumers will be facing hardship so more calls for government assistance will be heard. But if Washington steps up with more assistance, the deficit spending will go even higher, and that in turn will further drive-up inflation. It is said problems have solutions. Predicaments have only outcomes. I am now wondering just how bad the outcome of all this will be. This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a BA in Economics with honors, 1979, and California Insurance License #0L34249. His insurance agency is BAP INC. insurance services. Email: news@moneymanagementradio.com.