Jan 3, 2022

Current Inflation, Explained

Groceries increased by six percent, and essentials like gas by fifty. If you didn't earn a 6.8% raise, you're poorer than you were last year. How did we get here?
Current Inflation, Explained

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Understanding inflation: Inflation is when prices rise or money loses its value. It looks like a grocery store shelf where the items feel surprisingly more expensive.

  • Shortages cause inflation. Gas has increased in price because people want gas, but there is less to sell. It goes to those who are willing to pay the most.
  • Printing more money supply causes inflation. With more circulating money and no increase in goods, prices increase (explained further here.)

What is causing current inflation? Shortages and printing money. The government printed and distributed trillions while shortages spread across key industries (computer chips, cars, gas, plastics, and labor). More money to spend, fewer goods to buy. Additionally, corporations have taken advantage of inflation and increased their prices beyond necessity.

  • Money printing: The U.S. distributed over $800 billion in stimulus checks and printed over $3.46 trillion in response to the pandemic.
  • Corporations grabbing profits: Matt Stoller, an anti-monopoly economist, believes almost 60% of inflation can be attributed to corporate profit grabs.
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American meatpackers are a four-firm oligopoly in the United States. They raised prices for consumers, going above the costs needed to account for inflation.

The global automobile industry is a fourteen-firm oligopoly. They've colluded to keep their prices high even after the chip shortage passes.

How bad is inflation? The consumer-price index, the key for measuring inflation, is up 6.8% compared to 2020. This is the fastest rise in inflation since 1990.

  • Groceries are up 5.4%
  • Food is up 6.1%
  • Gasoline is up nearly 50%
  • New vehicles are up 9.8%
  • Used vehicles are up 26%
  • Beef is up 24%

Is inflation permanent? For a long time, Wall Street, the media, and government officials called inflation "transitory," implying that it would pass. They have since recanted the statement.

  • Expect essentials to continue rising in price and savings and retirement funds to devalue.

Everyone is affected by inflation. Money that sits around in cash or savings accounts loses value. Essentials get more expensive. And right now, raises aren't matching those increases.

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