What a life. People sit at home, collect unemployment, relish their stimulus checks. It’s grand. But they have to know it can’t last.
One can ignore all the businesses screaming “Help wanted!” One can refuse to pay attention to the rumblings of another wave of coronavirus-related lockdowns and push away to abstraction the thought of the national debt. (Who can fathom all those zeros, anyway?)
But it can’t go on. That’s because there are laws of economics, and if you poke the economy beast enough, it will bite.
It’s now showing its teeth — and written on those teeth are the letters I-N-F-L-A-T-I-O-N. As prices increase, earning power, of course, drops.
It’s happening right now, and given the current administration in Washington, are you surprised?
Average hourly earnings technically increased from $29.35 in June 2020 to $30.40 last month, according to the U.S. Bureau of Labor Statistics.
But real average hourly earnings decreased by 1.7 percent over the same time period, thanks largely to the consumer price index — which measures the price of consumer items — rising 5.4 percent.
With the 1.7 percent real earnings drop, those earning $50,000 annually effectively lose $850 to inflation.
And it’s looking worse: While average hourly earnings rose by 0.3 percent from May to June of this year, according to the statistics bureau, the CPI also rose by 0.9 percent.
Is the Biden administration responsible for rising inflation?
Yes: 95% (20 Votes)
No: 5% (1 Votes)
Mixing wages and inflation in its pot of economic numbers, the bureau spit out this sobering figure: Real average hourly earnings dropped by 0.5 percent in one month, between mid-May and mid-June.
Multiply that 0.5 percent by the number of months in a year, and you’ll see your paycheck evaporate at an annual rate of 6 percent.
You already know inflation is a problem if you’ve been to a gas pump lately or tried to rent a car or have been like the guy who works at a lumber yard and is referred to by a friend as “the lumber baron.”
And each tentacle of inflation can be traced back to some type of government action.
Car and truck rental prices are up 36 percent from a year ago. Stalled by the 2020 lockdowns, car rental companies sold a third of their fleets — 770,000 vehicles, according to New York magazine, which noted that now that demand is back, computer chip shortages mean there aren’t enough cars to be had.
The computer chip shortage developed because of the lockdowns, according to an analysis by the Detroit Free Press. Cars didn’t initially sell in lockdown, so auto manufacturers canceled orders for the chips that run vehicles and their accessories.
But when demand recovered, there weren’t enough chips for automobiles.
Meanwhile, retail gasoline prices are up about 96 cents since July 2020, according to the U.S. Energy Information Administration. Increased demand and higher crude oil costs have caused the price increase, according to AAA.
Whether valid or not, it’s hard to avoid the image of higher gas prices after the Biden administration canceled the Keystone pipeline immediately upon taking office in January, especially in the wake of the energy independence attained by the Trump administration.
At least there seems to be some relief when it comes to lumber prices, which have fallen 68 percent from late May, when the going rate was more than triple the pre-pandemic average price, according to Fortune.
Lumber price increases came about because of all those do-it-yourself projects people on lockdown initiated, according to Forbes. Lowered interest rates prompted more home building, and there were sawmill labor shortages (including those caused by stimulus checks).
Inflation is coming from two sources, Brian Jackson, an economist and accounting professor at Oklahoma’s Northeastern State University, told The Western Journal.
“The government is borrowing, selling treasury certificates to the Federal Reserve, and the Federal Reserve is having to pump dollars into the economy, of course, so by the quantity theory of money, inflation is going to follow,” Jackson said.
“Also, I think, really, all these stimulus checks that are going out — at least [to] the non-skilled labor force — is disincentivizing work, and so I hear stories all over the place of employers having a hard time finding people to work, so as wage inflation from that creeps into the supply chains at various points, you’re going to see product prices continue to increase.”
He also said the hardest hit in inflationary times are those on fixed incomes.
However, last month, Jerome Powell, chair of the Federal Reserve, predicted inflation would be short-lived, according to The Associated Press.
But no matter the rate of inflation or how long it continues to rise, so many of the problems can be traced to government policies, especially the lockdowns.
Some might argue the initial action to flatten the curve in 2020 was prudent because there were so many unknowns. But as evidence grew of the overwhelming survival rate of most people sick with COVID, suspending economic activity was irresponsible.
And yet, even now, there is talk of further restrictions, despite the ongoing business disruptions and growing inflation.
It’s a time requiring leadership, and given the Gallup assessment of the current administration, growing numbers of people aren’t finding it.