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INFLATION
MEDIA EXPLANATIONS NOT PARTICULARLY CLEAR WP on the ECONOMY ... Five charts explaining why inflation is so high (from January 2022) Original article: https://www.washingtonpost.com/business/2022/inflation-charts/ Peter Burgess COMMENTARY Newsmedia articles about inflation almost always annoy me because they are almost always rather primitive in content and rarely serve to help with a good understanding of the matter. This article is not exception. Price is a primary measure of inflation, and the behavior of price reflects the underlying supply and demand as well as the cost and price of the item. There are a very large number of different profiles of these things, and lumping them all together as usually happens makes useful analysis impossible. In this article there is reference to the price of used cars has been a major factor contributing to inflation in the previous few months. Well YES ... but is this particularly important for the majority of the population who buy a used car once every five to ten years and are not doing so right now. Most people buy groceries every few days and the movement in price for these articles has a very different impact on personal economy for most everyone. Most people also buy gasoline every few days and the movement in price of gasoline has a big impact on the monthly budget for all families. Other energy costs for heating / cooling and cooking tend to change as the energy companies manage their prices ... usually mainly for their own profit optimization benefit. For people who rent, the change in rent usually felt periodically rather than a smooth change month by month over time. For people who live in a house or other property that they own, inflation does not change anything except at the time when a new buy or sale transaction takes place ... most often something that happens only once every few years. Another major annoyance for me is the reality that the root cause of most modern inflation is the lack of effective competition in most of the modern economy. Adam Smith and his generation of economists were very suportive of the role of a market ... a free market ... to control prices and optimise economic performance, but the modern economy has been gamed and there is now an unhealthy concentration of power that is enabling embedded profit to be the dominant element of 'cost' in almost every product. The modern regulatory environment is completely outdated and while it served in the early 20th century to bust up trusts, it is no longer fit-for-purpose in the modern era of massive corporate concentration of power and unimaginable profits and return on investment. A final point ... the inflation of the last two years has almost nothing in common with the inflation of the 1970s. The business community in the US. Europe and all the major industrial countries lost control of energy supplies when OPEC (Organization of Petroleum Exporting Coutries) took control of most major sources of oil production. Prior to 1973 a barrel of crude oil was priced at under $3.50 a barrel. In 1973 it was raised to $13.50 and by the end of the 1970s the price was around $30.00 a barrel. In recent years the price has been in the range of $60.00 to $120.00 a barrel. This is important because almost everything that is produced and consumer in the modern world has a massive amount of embedded energy cost in its total cost ... but for energy companies a big part of the price is (for them) the very desirable high embedded profit in the selling price. When all is said and one ... most of modern inflation is the responsibility of the major oil companies and oil nations ... and almost nothing has been done in decades to make energy companies and energy countries bahave in the best interest of the world as a whole ... and no indication that this is going to change anytime soon. Peter Burgess | ||
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ECONOMY
Five charts explaining why inflation is so high
By Alyssa Fowers and Rachel Siegel
Graphics by Alyssa Fowers ... Alyssa Fowers is a graphics reporter for The Washington Post. Written by Rachel Siegel ...Rachel Siegel is an economics reporter covering the Federal Reserve. She previously covered breaking news for the Post's financial section and local politics for the Post's Metro desk. Before joining the Post in June 2017, Rachel contributed to The Marshall Project and The Dallas Morning News. Laura Reiley contributed to this report. Published January 12, 2022 at 10:35 a.m. EST ... Updated September 13, 2022 at 12:57 p.m. EDT (A Monthly change in overall consumer prices 0 +0.5 +1% Food August Shelter Other Medical care contributed most to other inflation in August Overall prices up 0.1% from July Energy Energy prices dropped two months in a row, offsetting other price increases July 0% June +1.3% Months of high inflation have had policymakers, economists and U.S. households grappling with greater price hikes for groceries, cars, rent and other essentials. The latest inflation data, released by the Bureau of Labor Statistics, showed that prices in August are up 8.3 percent compared with the year before and 0.1% higher than July. This is a breakdown of how we got here. Persistent supply chain backlogs and high consumer demand for goods have kept prices elevated. More recently, Russia’s invasion of Ukraine strained global energy markets and sent the national average for a gallon of gas above $5 earlier this summer. But gas and fuel prices ticked down, leading to a drop in overall inflation. In some parts of the country, particularly on the West Coast, it was not uncommon to find gasoline well above $5 or even $6 a gallon earlier this summer. But prices marched downward, giving much-needed relief to Americans nationwide. While gas prices fell last month, the cost of shelter and food prices continue to go up. Families across the nation are facing higher prices at the grocery store as a shortage of fertilizer from Ukraine, poor harvests, droughts and livestock illnesses all put pressure on supply. People are stretching their wallets for dairy, fruits and vegetables, baked goods and meats. Throughout the pandemic, new and used cars have been a kind of litmus test for the country’s supply chain issues and related price hikes. Used cars and trucks were a driving force behind the surge in inflation last year. The market relies heavily on trade-ins and auto parts, which have been in low supply during a global microchip shortage. That pinch has made it more expensive for dealers to get any of their models, much less repair them. All of those problems are also hurting the supply of used cars, which depend on trade-ins as well as rental car company inventories. What is causing inflation: The factors driving prices high each month There are some encouraging signs. The rise in used car prices — which made up a bulk of inflation for much of the past year — has slowed in recent months and are expected to drop as semiconductor shortages improve. The red-hot housing market is also cooling, as a run-up in mortgage rates discourages aspiring buyers from competing for the few homes available. Americans are starting to feel better about the economy and expect steep drops in inflation over the next year. The Federal Reserve has launched major interest rate increases to get inflation under control, penciling in seven hikes by the end of the year. In July, the Fed completed its fourth hike and raised rates by three quarters of a percentage point. Higher rates will slow the economy by making it more expensive to borrow money, which will discourage businesses from expanding and raise the cost of consumer loans such as mortgages. The challenge is a delicate one: If the Federal Reserve moves too forcefully to slow the economy, it could cause a recession and spell unwanted consequences for the job market and rest of the recovery. “Price stability is really the bedrock of the economy,” Fed Chair Jerome H. Powell said at a news conference in July. “And nothing works in the economy without price stability.” Data is from the Labor Department. Laura Reiley contributed to this report. Graphics by Alyssa Fowers ... Alyssa Fowers is a graphics reporter for The Washington Post. Written by Rachel Siegel ...Rachel Siegel is an economics reporter covering the Federal Reserve. She previously covered breaking news for the Post's financial section and local politics for the Post's Metro desk. Before joining the Post in June 2017, Rachel contributed to The Marshall Project and The Dallas Morning News.
| The text being discussed is available at | https://www.washingtonpost.com/business/2022/inflation-charts/ and |