Understanding what inflation is

Have you noticed the insane price tags recently? There is no doubt that the cost to live in the United States and many other countries is on the rise. This is caused by inflation, which takes away purchasing power of a currency. Lowering purchasing power correlates to increasing prices and  results in less economic activity, since many are not able to buy as much. Inflation affects entire countries, since each has their own currencies. This year alone, according to the U.S. Department of Labor Statistics, the inflation index has reached 6.2% over the past year. It has also been reported that inflation has reached its highest in over a decade, with inflation rates normally being around 2.5%. Inflation rates this high not only raises concern from the middle class, but also from investors and the elderly.

Inflation is causing trouble for many

Secondly, inflation is causing concerns for many of those who are on a budget. However, inflation has recently been causing bigger concerns for those who are retired. Since many are on a consistent income that stays the same, they are losing purchasing power as inflation rates have increased, especially this year. According to journalist Scott Horsley, from NPR News, “High inflation poses a particular challenge for people on fixed incomes like Rink . . . and her monthly benefit of $1,578 doesn’t stretch as far as it used to.” However, individuals who are involved with the stock market are also reasonably concerned about the U.S. inflation rate. CNBC journalist Carmen Reinicke writes, “Another reason that rising inflation worries investors is that it could encourage the Fed [government] to raise interest rates.” An increase of interest rates would greatly affect equities of investors, pushing them to sell stocks.

Many argue COVID-19 Is To Blame

Recently, the pandemic has been a major influence on the economy, and inflation. With restrictions being lifted, people are spending more time outside of their homes. Many people are spending more money in stores, which is increasing demand and accelerating inflation. Most businesses in the country are having trouble keeping up with supply to meet consumer demand, resulting in higher prices. Stevens Point business teacher Jeremy Castleberg says, “Since we have seen record low prices caused by the pandemic, prices have gone up by big percentages as life has returned to normal.” With prices being lower than usual during the middle of the pandemic, it is no surprise that stores are interested in raising prices as the pandemic dies down. However, the pandemic has also given many businesses staffing issues and supply chain problems. This leads to an increase of prices due to products not getting to stores as quickly.As a result of this, prices have gone up even higher.

Despite concerns, inflation may not be that serious

With inflation being higher than it has been in over a decade, it is reasonable to expect concern from many different types of people. Despite this, there are also numerous ways that this year should not be too concerning for the economy. Many wages are being raised in a response to rising prices. If not that, assets also could gain value after inflation dies down. Journalist Bradford Delong from Los Angeles Times states, “After all, wage and price increases are an essential part of rebalancing the economy.” While some may think that inflation is leading the economy back into times where inflation was high, others believe that is unlikely. They believe that the U.S. is stabilized and prepared for a recession than it was 50 years ago. For example,  jJournalist Dean Baquet from New York Times argues, “Today’s Fed [government] leadership is very different, and there is no perfect storm of repeated shocks to match the effects of the slowdown of productivity growth in the 1970s and other events of that era.” With the pandemic being the only slowdown of the national economy, it is a possibility that COVID-19 could be only a small bump in the road for today’s prices.

Moving forward as a country

Inflation has historically been tough for every class in the United States.  With prices rising in a short period of time, and the pandemic still around, it is a reasonable cause for concern. Despite this, the future still is bright for the economy. The U.S. has had many recessions in the past, with much worse situations than today. With everyday life returning to normal, the economy is bound to fluctuate at least a little bit.