Inflation Hammering Americans Although an End May Be in Sight
NNPA NEWSWIRE — Dr. Linwood Tauheed said the United States could end up with “the worse possible of all worlds” as the US economy struggles to recover from a devastating global pandemic, supply chain problems, absorbing the effects of the Russia-Ukraine conflict and the widespread sanctions imposed against Russia for invading Ukraine.
By Barrington M. Salmon, NNPA Newswire Contributor
Everywhere ordinary Americans turn, it seems, the spectre of inflation haunts their everyday lives. Everything costs more: Food. Shelter. Gasoline. Eating out. Clothes. Vehicles. And a most goods and services.
Illustrating the pervasive nature of inflation, is that rents, the cost of new and used cars and even something seemingly unconnected like dental services have seen increases. Meanwhile wages and salaries have scarcely kept up with red hot inflation. American families are paying what the Bureau of Labor Statistics (BLS) and Moody’s Analytics estimates to be an addition $493 a month for food and other goods in June because of inflation which jumped to 9.1 percent compared to 2021. It’s the biggest 12-month hike in prices in 40 years.
PRICES GOING UP, UP, UP …
Greer Marshall and Montina Vital told the NNPA they feel the effects of this crushing inflation every time they make a purchase, go to a restaurant, the corner store, supermarket or gas station.
“I am cutting back on some of my expenses and telling my children to find a job. Young people are used to buying sushi up the street. That’s $20 per person per trip,” said Marshall, a documentary filmmaker and video journalist. “Grocery shopping is not looking the same as it used to be. When I go to the supermarket or grocery store, I can only afford to get the items I eat that day or the day after because I cannot fathom the price of some things. The price of grapes is ridiculous. It’s like $3 a pound!”
Marshall, mother of two, said she has become creative in finding ways to cope.
“I’m not going out to do entertainment things and I’m learning to live with less. I am more focused on what I absolutely need,” she said. “When I’m home, I turn off the heat. I got me a little heater that I plug in. I’m not driving the car as much because gasoline costs $5 a gallon. If I don’t have to travel, I don’t. And I am charging for everything, even if it’s $20 because everything adds up.”
Market veteran and financial journalist Dylan Ratigan said in a recent interview that Americans are being buffeted by rising prices and extremely volatile markets.
“Inflation is at its highest level since the 1970s. Higher interest rates are affecting mortgages, credit cards and double costs, especially in housing,” said Ratigan, co-host of ‘Truth and Skepticism.’ “Oil and energy costs for transportation and manufacturing has doubled. Large institutions, trucking companies and airlines had budgets of fuel costs to fly, drive and run factories. Those numbers are wrong – a lot has happened fast.”
The Consumer Price Index’s standing at 9.1 percent in June was proof that inflation was burning hot and still spiraling. The prior month, the CPI stood at 8.6 percent, then the highest rate in 40 years. But in recent days, there are signs that inflation is cooling with gas prices falling lower every day for the past two months, the Federal Reserve raising interest rates twice in the last two months and fears about a recession tempered by strong jobs numbers, the gradual lowering of prices and skyrocketing prices on the housing market also going lower.
According to the BLS, all items except the food and energy rose 6 percent over the past year. Energy increased 34.6 percent over the last 12 months, the largest 12-month increase since September 2005. And the food index jumped 10.1 percent for the 12-month ending in May, the first increase of 10.0 percent or more since March 1981. Food prices rose 11.9 percent over the past year, and prices in sit-in restaurants and take-out increased 7.4 percent over last year which is also the largest 12-month change since the period ending November 1981. Gasoline prices increased 48.7 percent, electricity rose 12 percent, and natural gas increased 30.2 percent over the last 12 months, the largest such increase since the period ending July 2008.
Inflation touched just about every aspect of America driving up rent, household furnishings, airfares, mortgages, housing prices
According to a recent Gallup poll, about one in five Americans regard the high cost of living/inflation or fuel prices as the most important problem facing America today. Together, these two challenges account for more than 50 of the economic issues 35 percent of Americans point to as the nation’s top problem. The unyielding price pressures have forced people like Anderson and Marshall to significantly change their spending habits and has increased fears from members of the public, some politicians and economists that America is looking at either an outright recession or a notable slowdown of economic growth.
HIGHER PRICES, SHORTAGES, INFLATION = A TIGHT SQUEEZE
Dr. Linwood Tauheed said the United States could end up with “the worse possible of all worlds” as the US economy struggles to recover from a devastating global pandemic, supply chain problems, absorbing the effects of the Russia-Ukraine conflict and the widespread sanctions imposed against Russia for invading Ukraine.
“With the war in Ukraine and sanctions, stocks of gas, oil, fertilizer and other goods are decreasing. I don’t think inflation has happened yet,” said Tauheed, associate professor of Economics at the University of Missouri – Kansas City, and a member of the graduate faculty at the University of Missouri – Columbia. “We’re going to see increases. The impact from sanctions hasn’t really hit us yet. Prices of products are going up.”
Tauheed, said the United States has been on an economic roller-coaster during and since the emergence of COVID-19, buffeted by the economic disruption and downturn that caused and the ripple effects that the country is still experiencing.
“We are in a period where we’re seeing inflation from an initial cause: recovery. The crisis (the pandemic) came on quickly and money was put into the economy. Supplies didn’t keep up,” Tauheed said. “People who were home because of COVID-19 saved money (because they took no vacation or and spent little in 2020). People had money. There was a decrease in supplies while people had money to spent. That caused inflation to increase.”
At the same time, Tauheed added, the economy recovered to some degree “but supplies were not where they needed to be.”
“There’s inflation that you would expect from a quick recovery, but then you had the supply chain crisis,” he explained. “Countries, particularly China, were affected. Facilities were shut down. It doesn’t necessarily explain cargo ships at the docks, though. Independent truckers weren’t able to get business. Many went out of business, others retired. So there were not enough trucks. The problem at the docks will be with us for a while.”
The issues of cargo ships piled up at some of America’s major ports has eased because of a series of actions taken by the Biden administration and similar moves by the trucking industry and port authorities. There are hints that inflation may cool off in the coming months. As commodity prices fall, supply chain troubles exacerbated by COVID-19 are waning and swollen inventories hoarded by retailers have turned out to be an unexpected bargain for shoppers.
Vital, a certified financial education instructor, financial strategist, mother, wife, said the crazy rate of inflation caught her off-guard.
“Damn inflation. I don’t see that changing. It makes you rearrange your household,” she said. “I have always made things from scratch, and I find myself altering our diet even more. When I buy lunch items for my kids, I’m watching the cost. I have changed and adapted. When I need to go out, I plan where I need to go.”
Vital said when she filled up her gas tank when gasoline stood at $5.00, it cost $55. Before, she said, filling the tank cost $12 less.
“Hell no, I ain going nowhere if I don’t need to. We’re on minimal movement,” she said with a wry chuckle. “My husband has to go to work every day. We don’t know how much the prices of food and gas are changing but we have to have money for both of these. I put all my bills on a payment plan – put water, light and gas on a budget. That gives me more available money. That’s what I’ve had to do. You really have to know how much you have after bills.”
Vital said she also cut off automatic bill payments “because we have to have gas.”
“My husband travels 45 mins one-way to work from the house. He has to have a car, he has to get to work. Develop consistency with the known to keep a tab on the unknown. I do more shopping at Goodwill. I have a growing son who is growing out of his clothes. I look for clearances too. I have a strategy, a plan between gas and food.”
Vital and a number of other interviewees said they believe that they are being kicked around by inflation because of factors other than market forces.
“I really believe that corporations are gouging consumers. Businesses are getting on the bandwagon to make up for COVID,” Vital said. “Reports are that a lot of people will be pushed into poverty and I absolutely believe it.
Economists note that both cost of gas and spiraling food costs have been affected primarily because of the Russian invasion of Ukraine earlier this year which has upended global supplies of wheat corn, oil, wheat, corn and a number of other commodities.
WAR, INFLATION AND COVID-19 HANGOVER
JPMorgan Chairman and CEO Jamie Dimon said in a recent letter to stockholders that he is deeply concerned about the formidable tremors triggered by the twin challenges of spiraling inflation and Russia-Ukraine conflict because they pose a significant threat to this country and the world’s economic recovery.
“The war in Ukraine and the sanctions on Russia, at a minimum, will slow the global economy — and it could easily get worse,” Dimon said.
Dimon also explained that said Covid-19 – with stimulus money from the federal government, the necessity of rapidly raising interest rates to combat inflation and the war in Ukraine present an unenviable collection of challenges.
“We are facing challenges at every turn: a pandemic, unprecedented government actions, a strong recovery after a sharp and deep global recession, a highly polarized U.S. election, mounting inflation, a war in Ukraine and dramatic economic sanctions against Russia,” he said. “While all this turmoil has serious ramifications on our company, its effect on the world – with the extreme suffering of the Ukrainian people and the potential restructuring of the global order – is far more important.”
And with the war in Europe upending, agricultural, energy and an assortment of commodity markets, it’s very likely that additional sanctions could deepen the widening instability, he added.
Dimon said Americans should brace themselves for “potential negative outcomes.”
“Many more sanctions could be added – which could dramatically, and unpredictably, increase their effect,” said Dimon. “Along with the unpredictability of war itself and the uncertainty surrounding global commodity supply chains, this makes for a potentially explosive situation.”
“The confluence of these factors may be unprecedented,” he concluded.