You don’t need to read this or anything else to know that money is flying out of our checking accounts faster than before. Everything from gas and food to lumber and cars are spiking in price, and the latest CPI report released Friday said that inflation has reached a 39 year high of 6.8%. But that’s not all. Supply chain disruptions are contributing to this rapid inflation as well as making it harder to get the goods we need. And while there’s never a great time to pay more for basic necessities, this couldn’t be hitting us at a worse time. As we near the two-year anniversary of the first COVID-19 lockdowns, most of us are looking forward to feasts and fun with loved ones, which also includes giving generously to each other and charities.
Out of touch elites in the media and Biden Administration keep trying to dismiss or minimize these problems because they think we’re stupider than we are. At least one reporter is on record saying that inflation isn’t that much of a problem since Americans have more cash these days. Never mind that that cash is worth less because that’s what inflation does to our savings and checking accounts. The head of CNN said in a Tweet that the supply chains are fine because his local grocery store is full of milk. Never mind that American produced goods like milk don’t rely on international supply chains to end up on store shelves.
Then, Biden and his unimpressive cabinet tell us that we’re just too greedy, and that’s why it’s taking so much time for us to get our overseas goods. Yes, we’re horrible people who just want to fill up our gas tank for under $3 a gallon, feed our families without going broke, and buy some Christmas presents to bring a smile to our loved ones’ faces.
So, what’s really going on?
What’s inflation?
Inflation occurs when the cost of goods and services increases, and a modest rate of inflation from year to year is typical because of incremental increases in wages, demand, and the cost of production. Inflation is good for those in debt because it becomes cheaper for them to get out of debt, and it’s bad for creditors because the money they get back from the loan is worth less than when they issued the loan. That’s why loans have interest rates.
When inflation rises too rapidly it causes undue economic hardship on everyone. When the price of goods and services outpaces increases in wages, people from all tax brackets have less disposable income. Lower and working class people living paycheck to paycheck have to cut back on going out to eat, and wealthier Americans cut back on their recreational activities, which means the business owners and workers in those industries take a hit. As the rate of inflation increases, more Americans will have to choose between necessities like meat and heating oil.
But the CPI reported inflation rates under 7%, so it can’t be that bad, right? The CPI is a weighted index that calculates the average rate of inflation for all Americans despite the radically different lifestyles and expenses Americans have. So, let’s look at some more concrete numbers. Energy costs are out of control. In the past year, gas has gone up over 58% and heating oil has gone up over 34%. Food costs are skyrocketing; chicken is up over 9%, some beef products have increased by 21%, eggs cost 8% more, and coffee is up over 7%. Chip shortages, among other factors, have jacked up used care prices by over 30%. Even several categories of appliances and household goods are up over 7%. I’m willing to bet that most grocery receipts for almost every American are more than 7% more expensive, or the shopping cart is getting more than 7% lighter.
What’s driving inflation?
Like most economic and political phenomena, multiple factors seem to be responsible for these high rates of inflation. Rising demand is a factor that usually contributes to rising prices, but it seems that isn’t the main driver of inflation, much to the disappointment of a White House that wants to convince us that this is our fault for wanting things. Or better yet, that rising demand means the economy is bouncing back.
It seems to me that the rising costs of raw materials due to supply-side shortages, labor shortages due to COVID-19 lockdowns, rising transportation costs because of too few truckdriver and skyrocketing fuel costs (thanks, Biden, for making us energy dependent again), and an increase in the money supply are the factors that are more responsible for a more expensive cost of living. The government’s extended unemployment and stimulus programs have certainly contributed to the money supply problem because we’ve pumped more money into the economy without the job and wealth creation that would justify an increased money supply.
People are incentivized to stay home or work fewer hours to keep their government benefits while “Help Wanted” signs occupy small and large business windows across America. Vaccine mandates, hefty unemployment checks, and multiple rounds of stimulus contribute to this. So there are fewer workers in critical points of the supply chain, which prolongs the effects of the lockdowns.
The government’s ideas of sending us checks in the mail and passing massive spending bills will only make things worse. You cannot print and spend your way out of inflation. The more a government prints, the less the money is worth. The Weimar Republic is the classic case illustrating this point. The good news is we’re not in hyperinflation territory yet. The bad news is that left-leaning politicians, Biden’s economic advisors, the White House, and Janet Yellen are telling us that this uptick in inflation is “transitory.” I’m not an economist, but this seems like anything from wishful thinking to deceitful manipulation.
How are supply chains making it worse?
It’s one thing when American goods are more expensive to make and transport, it’s another kind of ball game when the international economy is also responsible for the rising costs of goods. Shipping containers cost exponentially more now than they did a year ago, and those costs keep surging. American ports have been backed up for several months, representing a breakdown in the international supply chain infrastructure. Global chip, labor, and material shortages don’t stay on the other side of the pond; they hit American checkbooks hard.
These international problems have me thinking that we should reevaluate what we manufacture at home and what we import. Under the last administration, America not only reached energy independence, but also became a net exporter of oil. And even while we were emerging from the lockdowns, gas prices were lower back then than they are today. Texas is starting to manufacture chips, but isn’t this something we should have started long before we were facing a chip shortage? And do we really want to wait for the next crisis for China to threaten to withhold vital exports to the US like it did with medical supplies in 2020?
I’m not so naïve to think that we can make everything in America and pretend like globalization never happened. We should not ignore the importance of competitive advantages and the benefits of globalization like third world political and economic development. But it seems to me that we don’t have to go so far as to be subject to all the whims of an international marketplace that doesn’t care about what it cannot monetize, like American political stability and independence.
But I guess the grinchy White House would need its patriotic heart to grow three sizes before we see that. We’re supposed to own nothing and be happy in the new world order. And that is something that deserves a Bah-Humbug!
Photo: "Globe" by rwkvisual is licensed under CC BY 2.0
https://search.creativecommons.org/photos/e3d70160-58bd-4067-bce1-35eea839bb45