Jackie Cushman: Here Comes Inflation Acceleration
I’ve been saying that inflation is on its way since April of this year. Well, it’s here, and it’s going to get worse. On Nov. 10, the U.S. Bureau of Labor Statistics released the consumer price index summary, revealing what most Americans already know: Prices are skyrocketing.
According to the BLS report, prices increased 0.9% last month overall versus 0.4% during September. Even worse, the annual increase for inflation in the last 12 months was 6.2% — the biggest increase since November 1990. The biggest driver is energy, up at an annual rate of 30%. Food is up 5.3%, driven by a 12% increase over last year for meat, poultry, and fish.
Recently, the Democrats’ spin has been that inflation is good because it’s an indication of economic activity (according to Press Secretary Jen Psaki). But it’s hard to argue with a straight face that an increase in fuel prices of 30% is good for Americans. While those in the nation’s urban areas might be able to walk to work and commute on metro transportation, millions of Americans must use their cars.
According to NBC News business reporter Stephanie Ruhle, the “dirty little secret” is that people can afford those higher prices. Maybe she can, but most people I know can’t just spend more.
Unfortunately, it’s going to get worse this winter. The U.S. Energy Information Administration released its predictions for the prices of fuel this winter compared to last. Their guess: natural gas will be 29% higher than last year, and heating oil will be 39% higher.
Let’s back up and revisit what inflation is and what it does. Inflation is the increase in prices for a fixed basket of goods between time periods. It’s a measure of how much more something costs at a certain point in time compared to what it cost at a different time period. So, if the predictions are correct and you paid $200 per month last year for heating oil, you will be paying $278 per month this winter. That money must come from somewhere — since your wages probably won’t be increasing by 39%. You will have to buy less of some other goods or services that you used to buy, or you could save less, or borrow more.
Inflation also occurs when the supply of money in the economy grows faster than economic growth. This has been happening as the government has funded more and more pandemic-related bills and other large spending bills. As the government prints more money, it is chasing the same number of goods and services. This results in higher prices for the same number of goods, which is inflation.
While Democrats and commentators are trying to spin the inflation story, Americans are experiencing the fallout in their real lives.
According to a Morning Consult/Politico poll released Wednesday, “three in four Republicans, three in five independents and nearly half of Democrats say they’re ‘very concerned’ about rising prices.” Additionally, “about three out of five voters hold the Biden administration’s policies responsible for inflation, including roughly half of Democrats.”
While the Democrats continue to spin the message, inflation is real to families as they go to the grocery store to buy food for their families and go to the gas station to put gas in their car. They know it costs more. Today, I received a letter from President Joe Biden telling me that I had received a direct deposit because of the recent passage of the American Rescue Plan. His message was that he’s here to help. What he didn’t mention was who was footing the bill. The truth is it’s just funny money. There is no government spending, there is government taxation, spending of taxpayer’s money by the government, borrowing by the government to spend more money than was taken in, combined with printing money to pay government spending, which leads to inflation. All this means is that the federal government is spending more than it gets from taxpayers, borrows, and prints to cover the difference, all the while driving up inflation. Who pays for all this? The American people do.
What Biden should have written is “get ready, inflation is just beginning, and this little bit of taxpayer-funded spending (funded through taxes, debt or inflation) we are sending you won’t even cover your heating bill this winter — so wrap up!”
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