Inflation

[Bubba]

From "The Morning", a daily e-mail from the New York Times


By Neil Irwin
Senior Economics Correspondent for The Upshot

Good morning. Why do so many things seem to cost more now?



Who’s to blame for inflation?

The rising prices of food, gas and other things we buy — in other words, inflation — were already a central economic issue of 2021. Those prices are up 6.2 percent over the last year, and shortages and other inconveniences are side effects of the problem.

Now inflation is also a central political issue. It is dragging down President Biden’s approval ratings and fueling discontent among Americans. It’s clear in surveys. It will surely be the talk at the table of Thanksgiving family gatherings next week (even if, as an economics writer, I might prefer to skip one day of talking about supply chain mechanics).

How did we get here? Who is to blame? To help you understand, today I’ll walk you through the most obvious candidates — and where the evidence looks strongest.

President Biden

Presidents have less control over the economy than headlines might suggest, but the current situation is an exception to the rule. You can draw a direct line from a specific policy decision that Biden and congressional Democrats made this past winter to some of the inflation happening now.

In designing the stimulus that Congress passed in March, Biden’s administration went big, with $1.9 trillion in pandemic relief — on top of a separate $900 billion package that passed three months earlier. Put the two together, and $2.8 trillion in federal money has been coursing through the economy this year while economic activity has trended only a few hundred billion dollars a year short of what mainstream analysts would consider full health.

If you think of inflation as a result of too much money chasing too few goods, then this extra spending is most likely a culprit.

But for all the trillions spent, Americans’ purchases through the end of September were only about $52 billion higher — or 0.4 percent — than would have been expected in a world where the pandemic never happened. I take that as evidence that most of the spending served to replace lost incomes (from people not working, voluntarily or otherwise) or was plowed into savings, and the inflation story is more complicated than just too much money floating around.

The Fed

The nation’s central bank has kept ultra-easy monetary policy in place for far longer than in past economic cycles. Its chair, Jerome Powell, has focused on returning the job market to full health and has projected that the inflation surge is temporary.

His response in large part took from the lessons of the last economic expansion, when the Fed started raising interest rates at the end of 2015 and, with hindsight, might have excessively crimped a recovery that was only starting to show big benefits to workers.

But Powell and other policymakers might be fighting the last war. At a minimum, the Fed has not played its traditional role of pre-empting an inflation surge by deliberately slowing the economy.

That said, monetary policy takes a long time to affect consumer prices, so it’s not a given that the inflation situation would be terribly different now if the Fed had started raising rates already.

Corporate America

When the pandemic shut down the world in 2020, operations managers at companies concluded: We need to do whatever we can to survive.

Automakers saw it as a severe recession and cut back production and orders for new supplies, while car rental companies sold their fleets. Airlines canceled orders for new jets. Energy companies canceled drilling projects. Companies in a range of industries laid off workers.

We’re still dealing with the effects of those decisions. This turned out to be a much shorter economic downturn, with a much speedier recovery, than many people were forecasting in the spring of 2020. So now, automakers are wishing they hadn’t canceled orders for semiconductors, car rental companies are struggling to add vehicles, shipping prices are through the roof, fuel prices are spiking, and companies are wrestling with labor shortages.

What seemed like prudent, sensible decisions turned out to be wrong for the actual economy we ended up with.

Despite all that, however, supplies of many goods actually are higher than they were before the pandemic. The problem is that demand is up even more.

All of us

Though everybody experienced the pandemic differently, in the aggregate a couple things are true.

We shifted our spending toward stuff, rather than services. Americans purchased 18 percent more physical goods — cars, washing machines, furniture — in September than they did in February 2020, while their consumption of services fell a bit. Because demand for such goods is off-the-charts high while supplies are limited, they are more expensive.

And many of us elected to stop working, or work less. (The number of people working remains smaller than it was prepandemic.) The shortage of workers has led employers to offer higher wages to attract employees. That fuels price increases even in services experiencing underwhelming demand, like restaurant meals.

The takeaway

The great shift in Americans’ purchasing and employment patterns prompted by the pandemic look like the primary culprit in this bout of inflation. Decisions by Biden and the Fed likely contributed, and earlier decisions in the corporate world made it harder for supply to adjust to match surging demand.

In assessing blame for the wave of inflation, the biggest question is whether policymakers should have foreseen the problems around reopening — and perhaps been more restrained in trying to stimulate the economy.

That means the future of inflation depends not just on what happens in Washington, but on what happens with the pandemic — and how quickly Americans return to more typical spending patterns and more people go back to work.

[Bigjohnski]

BS doesn't matter all you just posted

Biden will get the blame for his Hyper Inflation


from Politico
Left unspoken was a chilling reminder from history: Inflation has a unique power to kneecap a presidency. Incumbent presidents and their parties do not do well at all when inflation (and attempts to cure it) are on voters’ minds come election time. The gas pump, the supermarket check-out counter, the heating bill, the sticker on the windshield, provide — or seem to provide — powerful indictments against the party in charge.

[XtremeJibber2001]

Inflation is a complex issue involving multiple variables? Who would have thought.

[easyrider16]

If this is true systemic inflation due to easy money policies and government spending, there's only one way to fix it - for the Fed to raise rates. Remember when Trump tried to crucify Powell when he tried to raise rates?

But I suspect this inflation has more to do with supply chain issues and post-covid fallout. That's a more complex problem but the free market should eventually be able to right the ship if government stays out of it.

[deadheadskier]

No matter what policy is taken now, this will take time to unwind. We just came off and are still experiencing the most massive supply chain disruption since probably world war 2. Perhaps even greater because the economy is more globalized.

But world economies were kept flush with cash to help keep businesses alive and prevent a massive amount of people going insolvent.

Simple macro economics tells you that is a recipe for massive inflation.

You can raise rates now, but that impacts not just personal borrowing, but business borrowing as well. So, less investment and business growth = less job growth. The markets would not be kind to that reality.

[Bigjohnski]

It doesn't matter what you lefty's say


DUMB JOE BRANDON WILL GET THE BLAME!!!

[easyrider16]

Don't look now, but the port backup is starting to ease up:

https://www.reuters.com/business/retail ... 021-11-16/

Maybe the sky isn't falling after all?

[Bigjohnski]

the sky already fell Biden is an incompetent fool

[Bubba]

Finally some relief: Gasoline and natural gas prices are falling

https://www.cnn.com/2021/12/07/energy/g ... index.html

[Fancypants]

Finally some relief: Gasoline and natural gas prices are falling

https://www.cnn.com/2021/12/07/energy/g ... index.html

Amazing how that story shows up a day after Brandon and crew complain about negative media coverage.

It's great news that the cost of gasoline and natural gas have dropped a couple cents in the last 7 weeks but the reality is at this time last year it was almost $1.35 cheaper. That's not inflation, that's Joe Biden's energy policy in action.

[daytripper]

Finally some relief: Gasoline and natural gas prices are falling

https://www.cnn.com/2021/12/07/energy/g ... index.html

Amazing how that story shows up a day after Brandon and crew complain about negative media coverage.

It's great news that the cost of gasoline and natural gas have dropped a couple cents in the last 7 weeks but the reality is at this time last year it was almost $1.35 cheaper. That's not inflation, that's Joe Biden's energy policy in action.

You don't think the that people were staying home and not driving this time last year had anything to do with it?

[easyrider16]

Fancy is just repeating a Republican talking point. It's pretty easy to research the issue and see that gas prices right now and last year have almost nothing to do with Presidential policy.

[Fancypants]

Finally some relief: Gasoline and natural gas prices are falling

https://www.cnn.com/2021/12/07/energy/g ... index.html

Amazing how that story shows up a day after Brandon and crew complain about negative media coverage.

It's great news that the cost of gasoline and natural gas have dropped a couple cents in the last 7 weeks but the reality is at this time last year it was almost $1.35 cheaper. That's not inflation, that's Joe Biden's energy policy in action.

You don't think the that people were staying home and not driving this time last year had anything to do with it?

What was the price of gas in January of 2020 prior to the Wuhan Flu and Brandon???

[easyrider16]

Are you trying to prove that gas prices had more to do with the pandemic than the President? If you really believe President Biden's policies are to blame, explain which policy decision caused the gas price increases and how.

[deadheadskier]

Pipelines bro! Had Trump gotten his bigly, beautiful pipeline, gas would be a buck a gallon.