The Inflation Monster Has Been Unleashed
The comments below are an edited and abridged synopsis of an article by Bruce Wilds
Inflation has been unleashed upon the world, as reflected in soaring commodity and housing prices. Due to the Fed’s policies, Americans are about to experience a massive shift in the way they live. Also surfacing is how the Fed has pushed inequality higher. This means that inflation is about to devour the purchasing power of Americans’ income and also the savings of those that have worked hard and saved over the years.
Fed Chair Jerome Powell has cut rates and increased the Fed’s balance sheet. This has hurt savers, forced investors into risky investments in search of yield, damaged the dollar, encouraged politicians to spend wildly, and increased inequality. The greatest wealth transfer in history has begun, and the next crisis will accelerate the process. The same policies that dump masses of money into larger businesses (a quick, easy way to bolster the economy) give these concerns a huge advantage over their smaller competitors.
For decades, Americans’ incomes have lagged behind the cost of living. In addition, the CPI has been rigged to understate inflation and not to reflect its effect on American lives.
While many are working from home or working reduced hours due to Covid-19 lockdowns, many are paying little attention to the number of job opportunities that are vanishing daily. Jobs are being eliminated and the soaring wages businesses must pay to get people to work is adding a new element to the situation. It encourages businesses to bring in machines that reduce the need for human workers. Those calling it ‘creative destruction’ may look back with regret. Millions of small businesses being decimated by Fed policies that favour huge companies coupled with a surge in automation bodes poorly for small businesses and those looking for work.
Wilds discusses soaring transfer-of-payments figures in the US, and how inflation hits those on the middle and lowest end of the economic spectrum.