If you have been paying attention to the news recently, you’ve probably seen politicians, bankers, whoever else talking about the recent inflation issues that have been plaguing industries. The COVID-19 set the world economy back as it heavily disrupted the supply chains, but as things return to normal (as normal as things can be), the demand that was pent up in 2020 is roaring onto the scene yet we’re still in recovery.
It’s important to take the time to assess the current inflation and use that information to see what we can expect the world to through at us.
Transitory in Motion
Politicians have criticized President Biden by comparing him to Former President Jimmy Carter who was unpopular during his time in office as he had to deal with his own inflation problems and the gas shortages of the 1970s, but historians and experts have been quick to defend the president saying it’s too early to lambaste him. The White House wrote on its official blog where they argue the cause of the inflation (pent-up demand, supply chain disruption, and a reactionary response) as well as the point that this inflation is transitory.
This is the best chart I've seen that clearly explains what's going on with inflation.
Yes, April saw the fastest inflation since Sept. 2008
But that's b/c prices were compared to last April.
— Heather Long (@byHeatherLong) May 12, 2021
The authors of that White House piece say that the inflation is consistent with other moments in American history where something big disrupted the economy like the Spanish Flu pandemic or the “demobilization from wars.”
The economic reopening is well underway yet there are obstacles in the way like the supply chain is still not up to snuff and some jobs being unable to be filled. Corporations and other businesses have been anxious to get people back to work, but the average American citizen has been hesitant to do so as some are still worried over safety precautions against the virus and pay; people have realized these companies don’t pay that much and why should they risk their lives over so little money?
Hi, @DennysDiner ! Are you aware that your managers are putting up these signs? Please thank them for confirming that, instead of paying a living wage to the people who keep you in business, your company prefers to whine about workers who refuse to become indentured servants. pic.twitter.com/DnM4t14BkK
— BeaglesResist, House of Pfizer (@BeaglesResist) May 9, 2021
It’s unlikely that the current inflation rates will spiral out of control like in Venezuela because there are a lot of stopgaps preventing like the bettering of technology leading to an increase in productivity and efficiency.
When President Biden signed the economic relief bill, many people decided to save those $1,400 checks which played a role in inflating prices, but many central banks have stated that this isn’t anything to be worried about. Ben Yearsley, who is the investment director at Shore Financial”, said that this inflation would most likely go up in the next couple of months before going down, but also mentioned that people should start worrying if this trend goes beyond six months.
As travel restrictions lift and vaccines continue rolling out, experts predict that more people would be comfortable with spending that money thereby further accelerating progress.
In late April 2021, the U.S. Federal Reserve came out with a press release, and in it, it states that inflation expectations are well anchored so don’t expect things to out of control. In these crazy times, it’s important to properly analyze things before crying for the end of the world. From what I’ve seen from finance experts, expect this inflation to blow over before returning to more normal levels.