MONMOUTH, ILLINOIS (March 22, 2022) — "My biggest concern is the potential for inflation." — Ken McMillan to Monmouth Rotary in March 2021.
A year ago, before many people were really talking about inflation, Monmouth College emeritus professor Ken McMillan put out the warning in his annual economic forecast address to members of the city of Monmouth's Rotary Club.
Two years ago, before the COVID-19 pandemic had any momentum, McMillan said stock in Kimberly-Clark, which produces toilet paper, would rise. It did, of course, by about fifty percent.
"I wasn't lucky to make those decisions," McMillan told Rotary members Monday in the 2022 edition of his annual economic forecast to the club. "The laws of economics prevailed in those cases. . . Economics is not a political theory, a political phenomenon, a political philosophy, or a political tool. . . Neither the left nor the right can repeal the laws of economics."
That said, McMillan believes it's the job of Congress — and not the Supreme Court, the Federal Reserve or the White House — to make decisions that can move the economy, calling it "one of the dangers that I see in our country" when that is not the case.
Another danger is failing to pursue — and hand-in-hand with that, to honor — excellence.
"If we're going to have plenty, we have to be efficient," said McMillan, whose career has included teaching at Monmouth for 25 years and serving as chief speechwriter for the US secretary of agriculture and an Illinois state senator. "If we're going to be efficient, we're going to have to have people who know how to get more from our given resources.
"My concern is, we have developed in our economy the attitude that you don't have to really be that productive. You don't really have to be excellent. . . When everybody's a winner, nobody has to work hard to be a winner. One of my greatest concerns about the future is that we're going to lose our cutting edge. We're going to be less and less productive because people are learning you don't have to work to earn. And that is a big problem."
Reasons behind inflation
Not working to earn — which, in 2020, took the form of stimulus checks during the first year of the pandemic — is part of the reason for the inflation that McMillan predicted a year ago. It has reached levels not seen since before some of the Monmouth Rotarians were even born.
"We know today that inflation is probably the biggest concern we have in the economy," he said. "We have the worst inflation in forty years. That's bad enough. What's even worse is, we had forty years of assuming there would be no significant inflation, and we made decisions and plans accordingly."
McMillan has said for the past several years that "the Fed has kept interest rates too low, too long, and kept their quantitative reasoning too high, too long. The fact that they printed lots and lots of money and didn't do anything about it for the last year contributed greatly to inflation."
He listed three types of inflation — cost/push: prices go up because production costs go up; demand/pull: demand is greater than what is produced; and inertial: which can pick up speed like a ball rolling downhill, or plateau, if the ball is on a level surface.
"Normally, we might see one of those three at any given time," said McMillan. "But we have them all happening at once, and that's produced the inflation we have today."
McMillan said COVID can be blamed for some of inflation, as production slowed nearly to a stop for months in 2020. At the same time, "We added buying power into the pockets of consumers" through stimulus checks and not taxing those checks," he said. "People got checks for sitting back and doing nothing, and the result was we got inflation. That's where the main source of it came from."
Gas prices, which are boldly displayed in towns and along highways, are an evident indicator of the rampant inflation.
"A big part of the gas-price increase is the general inflation that took off in the past year," said McMillan. "Some of it is [Russian President Vladimir] Putin's murderous war. But the biggest part of it was some of the action taken by the government, shutting down the [Keystone XL] pipeline. Also, partially because of things that OPEC [Organization of the Petroleum Exporting Countries] did to lower the price of oil. . . Natural gas and oil are in limited supply, prices are high, and we're suffering the consequences of that."
A Whiteman Lecture, of sorts
On April 28, Monmouth College will host its Whiteman Lecture, which for the past three decades has annually featured an individual from business or industry speaking on campus.
McMillan's talk was a "Whiteman Lecture" of sorts, as it continued a Monmouth Rotary tradition of economic forecast talks that date to 1989. McMillan credited Ralph Whiteman, a retired banker and 1952 Monmouth graduate, for his "insistence, devotion, and hard work" that has allowed the local tradition to continue.
"I'd like to give Ralph a special salute because he makes this possible," said McMillan.
