Shocks to the system
Think of the pandemic as a dramatic shock to the economy, said Tyler Schipper, an assistant professor of economics at the University of St. Thomas.
“The economy is Humpty Dumpty and he fell off the wall and broke into tons of pieces,” Schipper said. “That prices continue to go up just means that it takes a long time to put those things back together.”
Take the oil and natural gas industries, for example. About a year ago, prices were very low, Schipper said. That meant it didn’t always make sense for facilities to be producing oil and natural gas at high volumes. Once demand rises, it takes time to bring facilities back online.
Then, particularly in the case of oil, “they’re also running into supply chain bottlenecks, whether that’s increased cost for transportation within the U.S., or in some cases getting in through ports. And those bottlenecks are both slowing things down and pushing up prices,” Schipper said.
The market for cars is another example of things not being quite back to normal, something Schipper said he’s experienced first-hand recently.
“I finally bought a new car, [but] I don’t have a new car right now, I have a new car in January or February maybe,” he said.
The car economy has been backed up for a couple reasons: new cars need computer chips, and computer chip factories aren’t meeting demand because of COVID-19 shutdowns, huge demand for consumer electronics during the pandemic and because of weather. Meanwhile, used cars’ prices have been pushed up because of high demand, and because rental car companies, which normally offload a lot of cars onto the secondhand market, didn’t do that to the degree they normally do during the pandemic, constricting the supply.
In recent months, the price increases for used cars started to slow down, but the increases remain for new cars.
Looking ahead
So costs, at least according to the CPI, keep rising — but will it go on forever?
Mark Wright, Senior Vice President & Director of Research at the Federal Reserve Bank of Minneapolis, said many of the clearly pandemic-related cost increases — like the increase in car prices — are still likely to work themselves out.
“I think that we’re going to see the same kinds of inflation stories into next year. Some of that is just that the supply chain bottlenecks aren’t going to be resolved immediately,” he said.
Other cost increases, like those seen in housing, are a reflection of a hot real estate market that’s now showing signs of a slight cool-down.
When the Federal Reserve measures inflation, it tends not to focus on the CPI. Instead, the Fed’s preferred measure is the Personal Consumption Expenditure (PCE), which has shown smaller increases. Another measure, the trimmed mean PCE, estimated by the Federal Reserve Bank of Dallas, has shown smaller gains, too, which Wright said supports the idea that this period of price increases may be temporary.
If officials at the Federal Reserve decide inflation is too high, they can take action to slow it down.
At the Fed’s September Federal Open Market Committee meeting, Federal Reserve officials indicated they may soon support tapering off the purchase of government bonds designed to stimulate the economy during the pandemic, the New York Times reported.
Chair Jerome Powell said supply bottlenecks could continue but that he expects inflation to return to around 2 percent in the long-run.
“While these supply effects are prominent for now, they will abate. And as they do, inflation is expected to drop back toward our longer-run goal,” he said.
Sooner or later we’re all gonna have to stop blaming the pandemic for EVERYTHING! There are lots of problems affecting us all but the most common denominators clearly seem to be more along the lines of: fraud, criminal behaviours, immense greed, politics…and a removed, disinterested populace who have just stepped back and lost interest cuz it’s all so over-whelming.
This is what happens when you print Trillions of Dollars and shower people with money. Inflation isn’t going away. It’s going to get MUCH worse. We are headed back to the Carter days of 18% mortgage rates.
The Fed is trying to hold down interest rates to bail out the government’s deficit spending. This is not going to end well. When interest rates go back to normal, the Federal government is going to be screwed.
Of course that “deficit spending” had nothing to do with the $8 trillion your orange boy added to the national deficit and the trillions the Republican congress added in cutting taxes to the 1% and corporations (who mostly didn’t pay taxes anyway). Trump undercut the dollar in so many ways in the past 5 years that it is about to lose any international currency clout and that will result in Reagan’s 18% inflation years and the long recession that followed those misbegotten lost years. I have to be amazed at the faux-conservative goobers who conveniently forgot that Bill Clinton beat Bush 1 with the slogan “It’s about the economy, stupid.” The nation was crawling out of the Vietnam debt-caused recession when the Nixonians fooled the Marching Morons into voting against their own interests and put Reagan (Trump 1) into the crashtest dummies’ seat and broke the nation, probably for good.
Inflation peaked in the 80s peaked at 14%+ in April1980. 5 months BEFORE Reagan was elected .
So …..
“Take the oil and natural gas industries, for example.” Yes, let’s.
1. The cost of transporting goods to market has a direct affect on the retail costs of those goods. (Econ 101)
2. Due to the Biden regime’s shutdown of the American oil and gas industries, the average cost of gasoline went from $2.17 in 2020 to $3.31 today, a 53% increase.
3. We went from an energy independent nation in 2020 to a nation dependent on foreign producers again. (Biden allegedly begged the Saudis to increase production and they said no.)
The lesson here is, never give anyone political power who has no idea how the economy works, including anyone who’s spent his whole life in government jobs.
And yet I just read that the fossil fuel companies are behind Manchin’s sole efforts to block build back better…and planing a massive increase in production lasting til about 2030. To hell w saving the planet and keeping it viable for future generations. I don’t have the link cuz I was whipping thru many sites, as I do daily the better to maintain a global grasp on world happenings…and yo obtain my news from many reputable sites. But I can arrest to the fact that it certainly wasn’t on a planned purposeful propaganda site, or anything owned by Murdochs, the likes of which the R only watch cuz they are addicted to the gloom & doom, lies over verifiable facts ‘news’ sites that all pander to them. And who file their ‘media’ companies under ‘entertainment’ instead of news or journalism, the better to escape lawsuits for misinformation &/or slander.
“The lesson here is, never give anyone political power who has no idea how the economy works”
That is a good lesson. Sadly, America elected Donald Trump, who had no idea how the economy works. They elected a trust-fund kid who inherited and then squandered a fortune. Trump has zero understanding of business. Zero understanding of economics . Zero ability to negotiate. He was an utter failure at everything he has ever done (other than hosting a game show) and was an economic failure as president.
Also, anyone with even a minimal understanding of economics knows that oil and gas prices have almost nothing to do with domestic politics. Yet another thing that Trump did not understand.
It’s been Biden policies of oil pipeline shutdowns and refusal of new drilling leases that have limited supply.
No, that is completely false. You are talking about pipelines that wouldn’t be moving oil for years.
Oil was even cheaper at the end of Obama’s presidency, then spiked when Trump took over. Even though Trump was totally incompetent, this wasn’t his fault. When prices declined at the end of Trump’s presidency, it was largely to the Covid-suppressed drop in demand, and has gone up as the economy has improved under Biden.
So a closed loop of Canadian oil being shipped to China would bring down our gas prices, all without hitting the open market? That’s some interesting economic theory there.
Blame Clinton, Bush, Obama, Trump and Biden for spending way too much, the Fed for recklessly printing money and 4 of 5 past Presidents (not including Trump) offshoring our manufacturing jobs by the 100’s of thousands. I have to laugh when Biden complains about America not producing enough goods here, he’s pushed policies that chased jobs out of America or stopped production here (Keystone, brutal NAFTA policy killing logging industry) for 50 years. Inflation is going to only get worse because changing 30 years of bad policy takes time. I said Biden is going to be Jimmy Carter (late 70’s) on steroids months ago and unfortunately it is happening.
Kinda depends what you classify as: “pandemic effect”. Low wages and unaffordable housing, child poverty, etc. etc. were huge problem before the pandemic. The more I see of American workers change of attitude towards wages and working conditions the more I’m thinking back-normal low wage employment isn’t going to happen. And I’m not sure Manchin’s demand that we end a child subsidy that raised millions of kids out of poverty is going to pan out. So when these economists talk about returning to “normal” they may not be recognizing a new normal that’s emerging from the pandemic. More poverty, lower wages, unafordable housing and health care, are NOT in everyone’s best financial interests.
On the other hand, these predictions are always more habit than analysis. These economists always predict some kind of return to normal within the next six months to a year, they’re rather like weather forecasters who get be wrong quite frequently without much notice.
Temporary?
“Most of the price increases we’ve seen are . . . expected to be temporary,” the prez claimed back in July, after inflation had soared steadily from just 1.4 percent in January (President Donald Trump’s last month in office) to 5.4 percent in June.” NY POST
Why are we questioning “The Big Guy?”
After four years of lifelong business failure Trump, we now have a president who understands economics and the economy is heating up. Inflation comes with that.
Here’s a little something you may not have known: when someone puts ellipses in a sentence, it’s a signal that something has been left out of the quote. This can be done for a variety of reasons, from saving space to creating a dishonest impression.
Here is the full quote:
“Our experts believe and the data shows that most of the price increases we’ve seen are — were expected and expected to be temporary.
The reality is, you can’t flip the global economic light back on and not expect this to happen. ”
I know that economic expertise and reality weren’t priorities in the Trump administration, but we’re past that now.
I actually expect a fundamental shift in the economy. The “labor shortage” is an indicator that we’re not going back to “normal” anytime soon, if ever. That means we may have to recognize that we don’t need EVERYTHING ALL THE TIME because people aren’t slaves to the economy. I think some things are going to be more expensive, period. And that’s ok. At some point, if we’re serious about actually making sure that the Earth doesn’t melt down for our grandkids (well, not mine, but all you other people who procreated), we’re going to have to shift away from a pure consumer-centric economy and start treating people like real people and not just vessels for transporting money from their own pockets into bigger pockets.
I’ve seen anecdotal reports that people are rethinking their relationship with work. They are tailoring their job to their needs, rather than adapting themselves to work.
Overall, that’s a good thing.
Hear hear!!! Ms. Kahler!