The United States economy remains in a state of low inflation, and the president’s economic advisors remain confident that this is likely to continue. However, there are increasing signs investors may be missing an important risk: price stability can easily lead to increased volatility as central banks use higher interest rates to prepare for future uncertainty.
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It’s Joe Biden’s Inflation. What is causing inflation in 2021?
On March 10, a sign outside a petrol station in Washington, D.C., displays gas pricing.
Agence France-Presse/Getty Images/Mandel Ngan
Inflation continues to rise, and working-class Americans are paying the price in lower real wages. That’s the bad news from Thursday’s consumer-price index data for February, and no matter how hard the White House tries, it can’t blame Vladimir Putin for it.
According to the Bureau of Labor Statistics, prices increased by 0.8 percent last month, the fastest increase in four months. That’s an increase of 7.9% in the previous year and 8.4% in the last three months. In other words, inflation is picking up speed.
The rise in inflation was fueled by increased gasoline, food, and shelter prices (imputed rents). However, the price hikes were widespread, indicating that the attitude of higher costs had taken hold among firms and consumers. For the month, the price of services (excluding energy services) increased by 0.5 percent. Remember when shortages in the supply chain for commodities were said to be the source of inflation?
Services, on the other hand, are not things. Transportation expenses increased by 1.4 percent, while shelter prices increased by 0.5 percent. Because housing expenses (which aren’t directly included in the consumer-price index) frequently follow them, the latter are expected to continue growing.
Although used-car prices, which some experts said accounted for virtually all of the inflation a year ago, were down in February, total inflation continued to rise rapidly because inflation expectations are now imbedded throughout the economy. According to the most recent NFIB poll, 68 percent of small company owners increased their average pricing in the previous three months, a 48-year high.
Despite recent increases in nominal salaries, all of this is poor news for employees. According to a second Labor Department data released on Thursday, real average hourly earnings declined 0.8 percent for the month. In the previous year, real salaries have declined nine times, notably by 2.6 percent since February 2021. (For further information, see the neighboring graph.)
This hurts low-wage employees the most since they pay a bigger portion of their salary for the necessities of life, such as food and energy, which are both growing rapidly. It’s no surprise that, despite strong GDP growth, Americans feel pessimistic about the economy.
On Thursday, the White House was ready for the bad news and, predictably, blamed Mr. Putin. “Today’s inflation data serves as a warning that price rises are stretching Americans’ wallets, and families are beginning to feel the effects of Putin’s price hike,” said President Biden in a statement. “Putin’s price rise” became a Democratic and media cliche very fast.
It’s not going to work. Russia’s invasion has undoubtedly led to recent increases in oil and fuel prices, and he’s at the top of our list of culprits. However, before Russia invaded Ukraine, inflation had already reached 7.5 percent on an annual basis in January. For months, the price of oil and other goods has been soaring due to inflation. In February, gasoline prices rose 6.6 percent, but they’ve risen 38 percent in the last year.
Mr. Biden can point the finger at Mr. Putin for a lot of things, but not for U.S. inflation. The source of the problem is domestic: Even though the economy had long since recovered from the pandemic slump, two years of record cheap monetary policy and massive government investment fueled economic demand.
If oil prices continue to rise, the Ukraine invasion will fuel inflation in March and the ensuing months. However, bringing inflation under control in the United States would need a policy shift in the United States: tightening monetary policy and reining in government expenditure.
State legalizations of gambling and marijuana show that governments’ primary purpose nowadays is to take rather than to serve. Images courtesy of Getty Images Mark Kelly’s composite
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The print issue of the March 11, 2022, was published.
The “biden economy” is a term that refers to the change in money supply. The “biden inflation” is the rate at which this happens. Inflation can be measured by looking at the price of goods and services, and also by looking at how much money is available.
Frequently Asked Questions
What is the cause of inflation right now?
A: The cause of inflation is the huge amount of money, or currency in general, that has been printed. This causes prices to go up because the supply is much greater than demand.
What caused inflation 2022?
A: Inflation in 2022 was caused by the American government. They issued too much money and it devalued significantly, leading to an economic crash.
What do you mean by inflation?
A: Inflation refers to a situation in which someones salary or wages do not increase any more.
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