Podcast #12 is about something that we all have to deal with whether we wish to or not-- inflation! The U.S. Bureau of Labor Statistics reported that the Consumer Price Index (CPI) for all urban consumers (CPI-U) was up 7.5% in the 12 month period ending January 2022, the largest 12 month increase since June 1982. That means we all received a reduction in pay of approximately 7.5%. Not many received an increase in pay of that much, I'm sure.
On February 10, 2022, Forbes.com reported that elevated inflation has been driven by supply chain disruptions and pent-up consumer demand for goods following the re-opening of the economy in 2021. Certainly, supply chain disruptions have reduced the number of goods available thereby creating a higher demand and value for those goods, but if there was only so much money in circulation, it wouldn't matter because the liquidity simply wouldn't be available no matter how few goods and services were available.
The New York Times reported in October 2021 that inflation is likely getting a temporary boost from the 1.9 trillion dollar coronavirus relief package authorized by President Biden earlier in 2021. However, former Secretary of the U.S. Treasury, Lawrence H. Summers said the coronavirus relief package was poorly targeted and risked overheating the economy. Turns out the man with experience may be absolutely correct. And the 1.9 trillion dollars is less than one tenth of the money that has been pumped into the U.S. economy in the last few years.
The Federal Reserve has pumped 2.3 trillion dollars into the economy in the past six weeks reported the Washington Post on April 29, 2020, further writing that the huge amount of money was shoved out and used far more quickly that most of the aid from Congress and the President. And that is a year and a half before the Biden relief package.
The Associated Press reported in May of 2021 that the Federal Reserve is projected to have purchased 3.5 trillion in government subsidies by the end of 2020 with newly created dollars.
The amount of money placed into the economy in the last three years is unbelievable! Millennial Z has fitted himself for a tin foil hat and thinks something so fundamental was purposely done since 80% of all money ever in circulation by the Federal Reserve has been printed in the last three years alone. Boomer X thinks it's simple government incompetence likely for the ridiculous fiscal policy to avoid a deflationary spiral.
Hyperinflation is extremely difficult to pull out of as evidenced by history and countries around the globe that have to try and function within it and gain control of their economy. But the Federal Reserve is so afraid of a depression they will commonly do foolish things in any attempt to keep deflation from occurring at any time in the U.S., and at any level.
Boomer X remembers the punishing 18-21% mortgage interest rates enacted in the 1980s by the Federal Reserve to pull back on the crushing inflation started in the late 1970s and the average person suffered greatly for over a decade. Jobs dried up and the landscape changed greatly to accommodate the drying up of liquidity in the economy. Only the rich could afford a loan and banks and those in the stock market made money due to the new financial instruments created to take advantage of sky high interest rates on loans.
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