We Just Got Even More Proof Inflation is On the Rise – ValueWalk Premium
Inflation

We Just Got Even More Proof Inflation is On the Rise

The most widely-used metric for price inflation hit a 12-year high in mid-May, showing that prices had risen 4.2 percent over a year. But some argued this was just a one-off outlier, not indicative of a broader trend or serious problem stemming from runaway government spending and money-printing.

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Inflation

Their case just got a lot weaker. New figures released today by the Commerce Department offer even more corroboration that prices are seriously on the rise.

Another key inflation metric, the core personal consumption expenditures index, exceeded expectations and came in showing a 3.1 percent year-over-year increase in prices. If you factor in energy and food prices, the inflation figure rises to a whopping 3.6 percent.

It’s also worth noting that this index and others like it notoriously underestimate inflation.

Where is this inflation coming from? Well, at least in part, it stems from the Federal Reserve’s money-printing to fund COVID-19 “stimulus” efforts.

“Nearly one-quarter of the money in circulation has been created since January 2020,” FEE economist Peter Jacobsen explains. But printing more money doesn’t mean we actually have more stuff, and “if more dollars chase the exact same goods, prices will rise.”

The problem with these inflation levels, which are still far short of truly catastrophic hyperinflation, is that they erode your savings and purchasing power. The money in your bank account or under your mattress is worth less now. And unless your income has risen more than 3-4 percent this year, you’ve really had a pay cut, because what ultimately matters isn’t the number on your paystub but what it can buy you.

Simply put, public policy is all about trade-offs. And the downsides of government largess include more than just the traditional check you write to the Internal Revenue Service. When mounting price inflation erodes your paycheck, that too is a form of indirect taxation you can trace back to Washington, DC.

Like this story? Click here to sign up for the FEE Daily and get free-market news and analysis like this from Policy Correspondent Brad Polumbo in your inbox every weekday.

Brad Polumbo

Brad Polumbo

Brad Polumbo (@Brad_Polumbo) is a libertarian-conservative journalist and Policy Correspondent at the Foundation for Economic Education.

This article was originally published on FEE.org. Read the original article.


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