Amid the economic and health crsiis that was (and is) the COVID-19 pandemic, the federal government and Federal Reserve decided it was the right move to print trillions of dollars. This money was intended to be used for relief, for businesses to obtain grants or low interest loans to keep the doors open and in the form of stimulus checks directly to individuals. There were many supporters and critics about this level of money printing, but chief among them on the critical side was the threat of inflation. Well, flash forward to today with the economic recovery and strong employment that the US has, and inflation is here.
As of October 13, US inflation rates stood at 5.4%, a 13 year high. Housing, rent prices, and construction materials are still on the rise after slightly plateauing off, and energy costs (electricity and gas) have soared by 25% in the last year. But the most major of macro trends is occurring in consumer goods, which includes food and household goods. There was a huge downward supply shock in the middle of 2020 that led to both falling prices and decreased production. However, the economy and demand have recovered so quickly that there is now a supply shock as production can not keep up. The result is a price spike in most categories of goods.
No matter how one felt about the quantitative easing by the government at the height of the pandemic, no one would argue that high inflation is good for anyone, except for the nominal value of revenues and profits for businesses. Inflation hurts the value of the dollar for all, as savings accounts deteriorate in real value. A large percentage of households rely on only savings accounts or live paycheck to paycheck, so a high inflation disproportionately hurts these households. High inflation is not a good way to close the income inequality gap, in fact it does the opposite. Low levels of inflation can be healthy for an economy as it grows, but not levels like we are seeing now - this high inflation could threaten to cripple the US economy.
