Who is most likely to be worried about high inflation
That's especially because the economy is still recovering from "an unusual period," he says, referring to the pandemic and supply chain issues. He's confident, he says, that lawmakers and monetary policymakers at the Fed will take the appropriate steps to rein in inflation , including tapering asset purchases and raising interest rates.
Hanke is less optimistic. But in a further rebuttal of Dorsey's prediction, Hanke also wrote on Twitter on Tuesday that his prediction for inflation is still "nowhere near the annual rate required to qualify for hyperinflation.
Sign up now: Get smarter about your money and career with our weekly newsletter. Inflation is continuing to rise—here's how it could affect your money. For everyday Americans, inflation is a double blow to bank accounts. Skip Navigation. Jennifer Liu.
The rising wave of regulations and legislation generates the need for more staff to administer, control and enforce.
In this context, enterprises big and small must allocate ever more resources to comply with the new rules, not all of them productive, but all of them increasing the cost of doing business.
Prices then increase. Classical economics posits that inflation occurs when aggregate demand is higher than supply. There is already concern about who will pick up the tab for the massive coronavirus-relief programs, the empty cash boxes of the social systems, and the tremendous resources being spent on attempts to create a state- and technocrat-controlled green economy. Also, we are witnessing an insufficient supply of goods and services as consumer demand has exploded after the Covid recession.
The problem is made worse by the money handed out in the social programs. What are the reasons for this insufficient supply? A classical explanation is supply-chain problems. Generous unemployment benefits in the U. Such a policy curbs labor supply while increasing spending. Another important reason is the misallocation of human resources. As more and more people perform unproductive functions in government and supranational sectors, their skills do not contribute to the productive sector of the economy.
Increases in national overheads reduce productivity. Inflation is likely to spiral out of control The phenomenon of the growing state has been with us for a long time. However, businesses in many countries have been doing a tremendous job innovating and increasing productivity.
That had a positive deflationary effect, compensating for the inflationary activities of governments and central banks. Now, it seems that a tipping point has been reached.
Until recently, policymakers frivolously lamented that inflation rates were below 2 percent, the magic formula for healthy growth. Well, 2 percent has been reached, and surpassed, over the last three months. Inflation is likely to keep on rising out of control. Rather than help expand the economy in the medium and long term, it gives rise to the worst, which is stagflation: persistent high inflation combined with high unemployment and stagnant demand.
Economists on supranational and national levels may not be unhappy, as the responsibility for the disaster will become unclear.
But the consequences will be dire: savers will lose their money without seeing the political leadership taking it in obvious ways. Prosperity will be rolled back; social problems will grow. The US only gained control of the situation after the Fed took severe measures that pushed the economy into a recession in the early s.
In a word, no. Even Summers gives his worst-case prediction only a one-in-three chance of actually happening. In a way, what comes next will be a lesson. Policymakers have been quite emphatic that if inflation picks up too much, they have the ability to get it under control. If inflation starts to increase too quickly, the Fed can increase interest rates to try to slow things down.
That means consumers could see higher interest rates on items such as car loans and credit cards. Our mission has never been more vital than it is in this moment: to empower through understanding. Financial contributions from our readers are a critical part of supporting our resource-intensive work and help us keep our journalism free for all.
Please consider making a contribution to Vox today to help us keep our work free for all. Cookie banner We use cookies and other tracking technologies to improve your browsing experience on our site, show personalized content and targeted ads, analyze site traffic, and understand where our audiences come from.
By choosing I Accept , you consent to our use of cookies and other tracking technologies. How much to worry — and not worry — about inflation 9 questions about inflation you were too afraid to ask.
Share this story Share this on Facebook Share this on Twitter Share All sharing options Share All sharing options for: How much to worry — and not worry — about inflation.
Reddit Pocket Flipboard Email. Explainers The big questions about Covid booster shots. Politics Democrats have no plan to fight housing inflation. Sign up for the newsletter Sign up for The Weeds Get our essential policy newsletter delivered Fridays. Thanks for signing up! Check your inbox for a welcome email. Email required. By signing up, you agree to our Privacy Notice and European users agree to the data transfer policy.
For more newsletters, check out our newsletters page. Give Give. Employers slashed 22 million jobs. Everyone braced for more misery. Companies cut investment. Restocking was put off. And a brutal recession ensued. Yet instead of sinking into a prolonged downturn, the economy staged an unexpectedly rousing recovery, fueled by massive government spending and a bevy of emergency moves by the Fed.
By spring, the rollout of vaccines had emboldened consumers to return to restaurants, bars and shops. Suddenly, businesses had to scramble to meet demand. Global supply chains became snarled. Costs rose.
0コメント