Dollar’s Purchasing Power Gets Zapped. It’s Permanent.

The comments below are an edited and abridged synopsis of an article by Wolf Richter

The makers of big-time consumer products have been announcing price increases, and sometimes sequential price increases, this year. This includes Procter & Gamble, Coca-Cola, Kimberly-Clark, General Mills, Unilever and others.

Dollar’s Purchasing Power Gets Zapped. It’s Permanent| BullionBuzz | Nick's Top Six
Shopping basket full of products and Dollar symbol. Balance concept, 3D rendering isolated on white background

Automakers are in the same boat. Small companies are struggling with higher costs, and are weighing or have already implemented price increases.

Big public companies are in a different ballgame. When big consumer products companies announce price increases, it’s an effort at a form of perfectly legal price fixing.

The US government has different inflation measures. According to its lowest measure, inflation in the Personal Consumption Expenditures Price Index (without food and energy) rose by 3.5% in June from last year. The Consumer Price Index uses the Cost of Living Adjustments to Social Security payments, and it jumped by 6.1% in June compared to a year ago. Private sector measures are much higher.

Inflation means that the US dollar loses its purchasing power. It means that labour loses its purchasing power. In other words, people have to work more to maintain their standard of living (or work the same and cut their standard of living).

Richter discusses the Fed’s preferred way (this inflation is not an accident); deflation; price increases in services (broadband and communication, restaurants, travel, etc); and rents are surging.

But the underlying common thread of these price increases is that there is a huge amount of money—newly created money—blindly and vigorously chasing after limited goods and services.

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