Millions of Americans are noticing that their weekly gas trips are increasing at a concerning rate, as is their monthly grocery spending. Not only that, there’s talk of a labor shortage and a supply chain crisis, with freight and transportation companies struggling to keep up.
Policymakers are either up in arms posturing about taking action or deflecting criticism on the situation. To even begin to address all these issues, we first need to simplify and affirm the one reality we’re all being confronted with. No, you’re not imagining it. Everything is getting more expensive.
According to the Labor Department, this is how much prices have increased this year:
Rental cars: 42.9%
Used cars: 24.4%
Meats, poultry, fish, and eggs: 10.5%
New cars: 8.7%
Restaurant prices: 4.7%
Why Everything Costs So Much
When it comes to talking about the economy, many of us probably feel a little intimidated. We want to know why the prices of goods are going up, what the buzzwords that the media keeps regurgitating mean, but we’re daunted by the experts at the forefront of the topic. And maybe that’s not entirely unintentional. When we’re disempowered by language and complicated terminology and changing statistics and numbers, we’re left in the dark, grasping for answers and not getting them.
It’s only natural to want answers, though. Why should we keep paying more for gas and watching the price of meat go up as the holidays approach (when our income feels stretched more than ever)?
As prices continue to soar, the purchasing power of the dollar decreases.
The short answer is inflation. We’ve all heard of it. But what does it mean? Simply, it means that your $1 bill is worth less than it was the same time last year, let alone 20 or 30 years ago. This is why prices for average goods – like a cup of coffee or a candy bar – now cost more than they did 30 years ago. Inflation doesn’t just affect average Americans, though. It influences global trends and the companies which manufacture and supply our goods, making an economic situation even more precarious when inflation goes from moderate to exorbitant.
We’ve all seen the absolutely disastrous consequences of exorbitant and downright criminal inflation. This was the driving force behind the economic disaster (leading to a humanitarian crisis) in Venezuela, which essentially made dollars worthless and caused the economy to crash.
Inflation Is Responsible
What does all of this mean for our Thanksgiving turkey, or even our paycheck?
The current rate of inflation in the U.S. is 5.39%. You should also understand that because high inflation decreases the buying power of the dollar, if you didn’t get a 5.4% raise this year, then you essentially took a pay cut. While you’re making the same amount of money no matter what, your income doesn’t reflect those external changes. The price of goods is increasing, stretching your dollar even thinner. Additionally, because inflation makes it harder for companies to predict the future and what costs will look like, prices are driven higher to compensate for that uncertainty.
Even worse, any money that's stored in a standard savings account (basically any account earning less than the 5.39% inflation rate) is actually losing value over time. You may have the same amount of dollars, but they're less valuable than they were last year or the year before.
If you didn’t get a 5.4% raise this year, then you essentially took a pay cut.
Understandably, Covid is often pointed to as the culprit behind these economic woes. For starters, the federal government funded the CARES Act by simply printing more money, rather than raising taxes or selling bonds. In fact, the number of physical dollars printed in the U.S. increased 25% last year alone. That's the biggest increase in money circulation ever in U.S. history.
But what's the big deal, you might ask? Doesn't more dollars mean more money? Well, sadly no. Dollars are only as valuable as the goods and services (in short, the GDP) that they represent. If you increase the number of dollars without increasing the value of the GDP, the dollars simply become less valuable. And in 2020, the U.S. GDP value actually shrank rather than grew. This effect, where your money becomes less valuable, causes prices to go up to compensate and is known as inflation.
Inflation is touching everything, not just our grocery bills. It’s affecting our labor force, which is facing shortages some of us have never before experienced, and a supply chain crisis which means that even if we have the money to pay for certain goods, they’re not available to us at the moment. Economist David Bullard points to Covid relief payments as a motivating factor in both crises. Government handouts affect the supply of labor, while simultaneously, extra money and an open economy motivate consumers to buy more, driving demand with little supply.
Just an Upper-Class Problem
While inflation balloons even further, White House Press Secretary Jen Psaki dismissed concerns about supply chain issues as “the tragedy of the treadmill that’s delayed.” Scarier still, even in the midst of such a tenuous economic situation, the party controlling the House, the Senate, and the Executive Branch, continues to push their $3.5 trillion reconciliation bill, while somehow marketing it as somehow costing zero dollars.
If you’re feeling a disconnect here, you’re paying attention. When policymakers talk about economics, they usually discuss taxing the rich and making the wealthy pay their fair share. A treadmill even on the cheaper end costs hundreds of dollars, so we can safely assume this economic downturn is being marketed as an upper-class problem felt by the rich, that only the wealthy are throwing tantrums about the costly products they ordered being stuck in ports and shipping freighters.
As long as the labor shortage increases, the economy won’t heal any faster.
But that’s not the case, is it? Stores everywhere are feeling the heat, and empty shelves or barely stocked ones are evident all over the place. Inflation isn’t just an issue that can be magically relegated to the arrogant rich. It’s felt especially by normal families, especially those in the middle and lower classes and below the poverty line, and by two-income households or parents just trying to feed their kids on a budget and struggling to.
And it’s going to get worse before it gets any better. The general consensus is that as long as the labor shortage increases, the economy won’t heal any faster. Furthermore, grocery prices will go up even more before the end of this year.
Everything is marketed and given an angle these days – even economic hardship. Don’t let yourself be gaslit by social media, corporate journalists, or the people in power. You know how much you’re paying for gas right now, and no one should be able to tell you to "manage your expectations" or that increased prices for products are a good thing.
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