LARRY LINDSEY: I would say that the economy is very close to fully employed, it's almost impossible to find the skilled labor, which is a big problem. Almost all firms and every survey that I know are reporting that problem. And it's a fully employed economy. In addition, the shelves are bare and that goes all the way back to the supply chain and we're pouring more demand. When you pour demand on a constrained supply, there's only one thing that can happen.
One of the newest things that has come out just in the last two or three months is firms have absolutely no hesitation to go forward and pass on any cost increases to consumers. There is no longer any resistance out there to higher prices. And the economists and central bankers have a phrase and that's called ‘well-anchored' inflation. And what anchors inflation is fear that if you raise prices, your competitor may not follow and then you lose market share. That is completely gone. There are no anchors holding this ship down. As costs go up, they're going to be pushed on in the form of higher prices to consumers.
You know, you're pouring gasoline on a fire. We were very, very close even at the end of last year to back to where we were before COVID began in terms of output, you know, there seemed to be a little room in the labor market, but we have labor market policies now that do not incentivize people to actually go to work or take a job. They generally do better, not in a job. And as long as that's the case, it's going to be very hard for firms to gear up and produce everything people want. That's our problem right now. We have bad supply-side policies and we have excessive demand-side policies.