Another point of view: Widespread ignorance of what inflation means | Editorials
Dollar Tree, one of the few dollar stores to deliver on its name promise on Wednesday announced a shocking development. His costs had risen so much in recent weeks that he could no longer hold the dollar line. Instead, he regretted to announce, many items would now cost $ 1.25 or $ 1.50.
Wall Street was thrilled. Dollar Tree shares surged. But the news was a particularly vivid reminder of the clear and present danger of inflation, coming for even customers who could least afford it.
Signs of rising costs being passed on to consumers are ubiquitous: menu items in restaurants, grocery totals at checkout, pain at the gas pump, container shipping prices, lumber costs, prices real estate, increased spending on labor for small businesses, etc. to. There has been disagreement over whether this is a temporary phenomenon of the upturn in COVID-19 and associated federal spending (which tends to be the liberal position and is the official prediction of the Federal Reserve) or a serious threat, especially given the stubborn supply. chain issues that don’t seem to be improving. It’s a theory that is gaining traction among many business leaders (and even some voices at the Fed).
But all of this overlooks a crucial and greatly underestimated factor. Many Americans, especially those under 40 and including many journalists and much of the Twitterati, have no personal experience of what inflation can do to an economy or a citizen saving for retirement. . They are not afraid of the growling wolf. So those who see its dangers have some education to do.
Take, for example, the decades-long progressive struggle for a minimum wage of $ 15 in Chicago, a campaign that culminated in the passage of this law last July. Numerous media have celebrated this achievement: “And for the early organizers…”, reported WBEZ, “The Fight for $ 15 still offers important lessons on how to focus campaigns not on preconceived notions of what can be. won, but rather to stay focused on what would measurably improve the lives of workers.
The word inflation does not appear anywhere in this report, which is typical of how most of the media covered the minimum wage issue, rarely noting that the scale and strength of victory surely depended on the rate of victory. annual inflation, which, history teaches us, can shatter such a gain in no time.
Of course, it is accepted that the amount earned could have been higher, and it should be noted that there may be a need for future campaigns for higher wages. But $ 15 an hour is still billed as a good payoff for quite a while. Progressive organizers campaigning for minimum wage increases across the country barely breathed the word “inflation” and rarely indexed their demands. Integers were more politically effective and much easier to understand. This has contributed to the problem of inflation and ignorance.
On the other side of the political spectrum, take the compound 3% cost of living adjustment, or COLA, given to Illinois government retirees each year. These increases have been attacked for years by conservatives and business groups as bad tax policy, exacerbating the state’s financial problems. This page often sued them as well, arguing that the adjustments were far above the rate of inflation and far more than what private sector workers were likely to receive. Before the pandemic, these arguments were compelling.
But now we are seeing the prices rise rapidly. It can and certainly should be argued that the state cannot afford the increases (which are unrelated to inflation) if it is to lift its citizens out of the pension crisis. But the idea that the COLA alone is massively out of whack by inflation seems more fragile, given that the consumer price index in June was up 5.4% from the previous year.
Companies are girding their necks with having to pay more for workers of all stripes. And they will factor that into their prices. They won’t have a choice.
The problem with inflation is that it reduces the real value of people’s savings accounts, making a retirement that once seemed secure much more temporary. It affects the stock market, where prices are based on future growth prospects, which are increasingly difficult to assess in an inflationary environment. And that has an impact on earnings, which in turn disrupts index funds: this could be seen when warehouse chain Costco reported its results in recent days, claiming sales have been great, thank you very much, but that the costs, inexorably, increased, a shadow of sadness. Your local pizzeria knows this as well.
Young people have no idea what it was like during the high inflation years of the 1970s, of course. They don’t feel that expensive mortgages reduce their chances of getting a loan or having their hard-earned savings eaten away by soaring prices. They may well receive a crash course on this understanding in the weeks and months to come, but part of current progressive orthodoxy is still that the danger of inflation is overestimated. Too many people have bought this hook and line and sinker.
Yet this Dollar Tree price increase suggests otherwise. Imagine how difficult it must have been for the executives of the company, given that their entire identity was shrouded in this same barrier.
Add more and more, especially in Europe, that some bad actors in the world (like Russian President Vladimir Putin) are manipulating these inflation-friendly supply issues for their own political ends, especially when it comes to supply and distribution of energy, and the dangers to the national economy and the standard of living of every individual are only increasing. These questions, coupled with the rising costs that are already worrying us, could well turn into a frightening scenario that is much less temporary than we prefer to think.
Those with worn treads who understand the dangers of inflation need to be taught. The wolf is at the door.
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