Part of the driver of inflation is increased pay levels for some of the lowest paid employees, due to various labor market conditions. Much of food depends on many of these lowest paid employees whose pay has gone up from $8 to $15 per hour or whatever.
Yes, these lower paid employees may not like paying an extra 10% or whatever for food, but it can be more manageable if their own paychecks are now much more than 10% higher than before. Of course, those who are not in work situations where they got substantial pay increases due to labor market conditions in their areas of work are the ones seeing only the consumer side of inflation. Since most upper income people (who tend to be well represented on this forum) fall into this latter category, it is no surprise that they see only the downsides of what is effectively accidental wealth and income distribution away from them and toward some of the lower income people.
This downward redistribution is probably only a temporary blip in the general trend toward upward redistribution.
Don’t get me wrong. I think this is the silver lining. For people who live on $8/15 an hour every penny helps. I see it as a much bigger trend. During Covid supply chains were so tight that everything went up in price. But the final costs are stymied by people’s ability to pay for food and basics; Or, they just don’t buy more expensive, luxury items etc.
I don’t think inflation at the moment is driven mainly by the $8 to $15 trend. I can’t tell you what I think has driven it or will continue to drive it because I would have to dive into politics and that’s against the TOS. I do agree that minimum wage jumps have some bearing. I just don’t think that’s the key driver. By us, they can’t get folks for $15.50. I’m starting to see $17-19 for “low wage” jobs.
SS payments are expected to increase by 8.7%, the highest COL increase in 40 years. The sad part is that last year’s payments were lower than the COL, so this big jump is only going to take us to where they should have been, not to a place where seniors living on SS can really afford any luxuries – you know, like groceries.
Unless they also adjust the poverty level, many. seniors won’t qualify for other social programs like LEAP or food stamps. My mother gets about $2000/mo so this would take her to $2200. That takes her out of qualification for both programs. The extra $200 won’t cover the increase to heat this winter.
The energy situation in Europe is because many European countries do not want to give money to Russia (to purchase natural gas) because they now see Russia as a major national security threat (with Ukraine being the canary in the gas pipeline on that front).
Obviously, if the disruption of international trade for various reasons (COVID-19, international relations issues, etc.) results in an unwinding of economic globalization as firms and countries try to reduce the risk of supply chain disruptions in international trade, that could result in even more price increases, since consumers and businesses have more limited markets to shop for things they need, instead of being able to shop the entire world’s suppliers.
Regarding food, Ukraine was a major food producer and exporter, so the conflict there affected the world food market. In addition, crop failures (e.g. flooding in Pakistan) can also reduce food supply on the world market (by reducing exports or increasing demand for imports in the affected country).
I think you are missing another HUGE factor. Countries are no longer using fossil fuels as they transition away from them. They are dependent without them on Russia and the markets. They have the wind farms running and they are looking at alternatives but they are falling short (black outs etc)
Undoubtedly. Though food prices in the US have also risen sharply and we are not net importers of UK foodstuffs. Again lots of factors and not fair to the subject to address them without bringing in all of the geopolitical factors ( and that’s hard with TOS).
IF you believe that energy price fluctuations and food prices are mostly/solely based on the war in the Ukraine then that might work as a rationale. It’s cited a lot on the US news. If you think there are multiple factors beyond this simplistic rationalization, it will not. It’s very interesting to read how each nation is thinking about causation re: inflation and what to do about it. Hint: They aren’t saying it’s all based on the Ukraine. This seems to be a certain US perspective. Though there are lots of discordant voices. Like life, it’s complex.
There’s some quote, don’t know the exact one. It basically states two things can be equally true. Neither contradicts the other. I don’t see how you can’t imagine that my opinion that the economy is the worst in 30 years AND jobs will be lost can’t be equally true.
The economy IMO is the worst it’s been in decades AND there will likely be a huge drop in economic activity in the next year, IMO. It’s difficult to make predictions, but not impossible if you follow basic underlying factors. That’s exactly what economists do.
I don’t think anyone ever claims to have perfect predictions ( I certainly didn’t) and yes, it’s difficult but it’s done everyday, by economists. There are even channels with dozens of people on everyday doing just this, making predictions and reading the economy and trends. Bankers also do this as do many other people in fields like stocks, business trends and so many more.
They aren’t. They messed up the big stuff and it’s going to be difficult to tweak the small things. Fed can tweak here and there. Can’t turn the entire economy around without major pain.
I agree with easy money being the problem. My point is the FED should keep inflation target to more realistic 4% not 2%. I was hugely disappointed with fed hanging onto 2%. In what universe do they live?
Would they have done anything different in terms of the latest increase in interest rates? I doubt it, given where inflation is today. And changing guidance on the target at this point would further embed inflationary assumptions in the economy, and ensure everyone wants at least a 5% salary raise for next year. The biggest argument in favor of 2% is that it can be effectively ignored when consumers, employees, retirees etc plan their finances.
IMO, things are going to get pretty bad. Expect oil prices to rise steeply in the winter exasperated by the war in Ukrainian. Ultimately, the fed will want to see unemployment at 4-5%. So expect 50 basis point increases in fed rate at next two meetings. It’s gonna get ugly folks.
My concern, though is the fact that most of this is supply chain inflation. A lot of our imports are still ramping up production, like car semiconductors. Raising rates might just send us into 70s style stagflation.
Particularly for our kids’ generation. If your kids haven’t already gotten settled or they need a mortgage, a loan for education or want to start a business, it’s going to be tough.
For those with recent grads or those about to graduate college, how worried are you about inflation for your kids?
I expressed concern to my H just a few days ago and he reminded me that our first mortgage was at 8% and that I shouldn’t worry about it. Honestly, I am worried about it. D has already starting looking at apartments and rents are higher than expected. Her salary is higher than expected too but I do have concerns that inflation will outpace her salary for a while. Shes 3-4 years away before thinking about home ownership but I don’t know if that’s better or worse.
IMO supply chain is a part of the cause but probably less than the amount of money that been injected I to the economy.
I found it interesting in Powells press conference when he specifically pointed out that states are “…still flush with money”. Until all that money works it’s way through the system we’ll be hurtin’ fer certain
Assets bought in the 1980s had the best return. The kids will be fine. High real rates will impose some discipline. The growth that will come after will be healthy.
