Everyone is worried about inflation. Of course, they are. We should never tell people how to feel, and that's true now more than ever. Policymakers must act.
Inflation is painful but is it possible that the economy needs inflation for growth to happen? Kinda like a slinky? Is it possible that trying to find the "perfect balance" for growth stymies inflationary fueled creativity, competitiveness and innovation that eventually leads to growth? Just completely uneducated, unsupported questions I am wrestling with.
To consumers, inflation is prices they pay. Higher prices perceives as higher inflation.
You write about consumers:
"They do not blame consumers like themselves for buying so much stuff. Not surprising, but not Econ 101."
But not everyone is buying more stuff. People on fixed incomes, for example have likely not been buying more.
The government (federal + state) dumped an awful lot of free money into people's and business pockets in the name of battling the pandemic. Then you have all the people who have and are getting significant hourly raises. Here's the conundrum that is never discussed:
What people earn is essentially stratified. When you increase the lower end to give them a more "livable" wage it means that the people who were earning this new amount and higher now want raises to keep their relative earning position. I believe I recently saw that Target was offering some new hires $25/hr. Apple store employees now want $30/hr. This for RETAIL! For low knowledge jobs. These increase are not taken up by increased rents/mortgages yet as they take time to change so those increases are burning holes in peoples pockets..
If anyone thought that the vast majority of people who found themselves with more money in their pockets would put it in savings, then you don't know the American consumer. A lot more spending should have been expected and similarly, increased prices because more liquid money sloshing around the economy will always lead to higher prices as that money gets spent.
I live alone and do my own shopping so I know all the prices for grocery items. Yesterday I brought gas for my car at Costco. Premium, which what my car needs, was $5.56/gal., which is anywhere from $0.40-1.00/gal cheaper than other stations. 14.4 gals cost me $80.05! EVERY other station here in my area of CA is in the $6+ range.
I stopped at 2 other stores beside Costco, Grocery Outlet and Smart & Final. Prices for everything are way up. Take eggs for instance? Two brands of jumbo eggs at $4.49/dz & $4.99/dz at GC, usually one of the stores with lower prices! Sure, I know, bird flu and all that but consumers only see the final prices and 80% of the people likely know nothing about the recent bird flu epidemic in the USA. At Costco again, I found a dozen extra large for only $2.10. Yea!
I could go on but I'll spare everyone. The bottom line is that excess money in the economy tends to get spent, there is a real inflationary cost to paying people more and the Dems WILL get blamed for inflation come November.
Clarity for this day. There are individual inflationary beliefs, perceptions, day-to-day experiences, feelings, opinions; and then there is the pragmatic scarcity of resources (at a specific price) produced by the dynamic hard-data/facts that people experience each day; taken whole, or in part, none of these individual metrics offer us a generalized, reconcilable equation decoding the significant meaning, personal impact for everyone, everywhere, collectively.
Without offering mental-diapers for people you simply tell them, ‘here are the facts from an historic-economic POV’, using data. You remind them—and peers—that as ‘grown-ups’, that it is absolutely for them to interpret & decide the significance of inflation & the deflated dollar to them, in their own particular pockets. You do this by shining a light on the potential plethora of heterogeneity of the human experience in today’s world, that make any inflationary reconciliation statements ‘for all’, on APPs like Twitter or Meta, or in public talks, an aggravating exchange for somebody-somewhere, at best.
Good post Claudia. We need much much more of your voice.
A conversation with Tom Keene was phenomenal. And reckon eally impressive perspective!
To understand what you pointed out, I could not help but come to this site.
Whether I support your stand point or not, this viewpoint massively impressed me.
Massive thanks.
From South Korea
Inflation is painful but is it possible that the economy needs inflation for growth to happen? Kinda like a slinky? Is it possible that trying to find the "perfect balance" for growth stymies inflationary fueled creativity, competitiveness and innovation that eventually leads to growth? Just completely uneducated, unsupported questions I am wrestling with.
To consumers, inflation is prices they pay. Higher prices perceives as higher inflation.
You write about consumers:
"They do not blame consumers like themselves for buying so much stuff. Not surprising, but not Econ 101."
But not everyone is buying more stuff. People on fixed incomes, for example have likely not been buying more.
The government (federal + state) dumped an awful lot of free money into people's and business pockets in the name of battling the pandemic. Then you have all the people who have and are getting significant hourly raises. Here's the conundrum that is never discussed:
What people earn is essentially stratified. When you increase the lower end to give them a more "livable" wage it means that the people who were earning this new amount and higher now want raises to keep their relative earning position. I believe I recently saw that Target was offering some new hires $25/hr. Apple store employees now want $30/hr. This for RETAIL! For low knowledge jobs. These increase are not taken up by increased rents/mortgages yet as they take time to change so those increases are burning holes in peoples pockets..
If anyone thought that the vast majority of people who found themselves with more money in their pockets would put it in savings, then you don't know the American consumer. A lot more spending should have been expected and similarly, increased prices because more liquid money sloshing around the economy will always lead to higher prices as that money gets spent.
I live alone and do my own shopping so I know all the prices for grocery items. Yesterday I brought gas for my car at Costco. Premium, which what my car needs, was $5.56/gal., which is anywhere from $0.40-1.00/gal cheaper than other stations. 14.4 gals cost me $80.05! EVERY other station here in my area of CA is in the $6+ range.
I stopped at 2 other stores beside Costco, Grocery Outlet and Smart & Final. Prices for everything are way up. Take eggs for instance? Two brands of jumbo eggs at $4.49/dz & $4.99/dz at GC, usually one of the stores with lower prices! Sure, I know, bird flu and all that but consumers only see the final prices and 80% of the people likely know nothing about the recent bird flu epidemic in the USA. At Costco again, I found a dozen extra large for only $2.10. Yea!
I could go on but I'll spare everyone. The bottom line is that excess money in the economy tends to get spent, there is a real inflationary cost to paying people more and the Dems WILL get blamed for inflation come November.
Points well taken. Got it!
Clarity for this day. There are individual inflationary beliefs, perceptions, day-to-day experiences, feelings, opinions; and then there is the pragmatic scarcity of resources (at a specific price) produced by the dynamic hard-data/facts that people experience each day; taken whole, or in part, none of these individual metrics offer us a generalized, reconcilable equation decoding the significant meaning, personal impact for everyone, everywhere, collectively.
Without offering mental-diapers for people you simply tell them, ‘here are the facts from an historic-economic POV’, using data. You remind them—and peers—that as ‘grown-ups’, that it is absolutely for them to interpret & decide the significance of inflation & the deflated dollar to them, in their own particular pockets. You do this by shining a light on the potential plethora of heterogeneity of the human experience in today’s world, that make any inflationary reconciliation statements ‘for all’, on APPs like Twitter or Meta, or in public talks, an aggravating exchange for somebody-somewhere, at best.