92 Comments

I am privileged enough afford a prime rib roast for our holiday meal. However, I had to pause noting the $26 per pound price at the butcher. Do the math on a 18 lb full 6-rib roast... $468. I paid $18 per pound in 2019. $324... and I thought that was a big deal. Instead, this year I got a half-size boneless version, served smaller portions to our guests and donated twice our annual standard to the local food bank. I also donated to the RNC to help them replace the Democrats in DC as they are clearly making a mess out of everything.

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You advise people to build up their savings. Why would people save a dollar when it will be worth less every day? That $1000 stash I saved this year is worth $900 next year. Makes no sense to save... and that is why inflation is pernicious.

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I live in American liberal land in a liberal college town and have my self-awarded PHD in liberal behavior studies. One of their behaviors is demonstrated anxiety over economic abundance. They are largely growth-change-averse and scarcity-change-craving. They travel to 2000-year old European villages (ironically only sustained by their travel destination economy) for vacation and come back lamenting the signs of REAL American economic strength and growth. Their aesthetics sensitivities are flamed and they are embarrassed that their country does not look like a 2000 year old vacation destination. So they go to work agitating and voting for scarcity-change... with an irrational opinion that it will make things better.

They are people with a scarcity mindset. They are anti-abundance except for an abundance of their own power and control. It is a personality flaw. It is why they create a mess. They should never be in charge.

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The Fed will also keep interest rates near zero so the feds can spend and spend and spend, borrowing everything. Because when interest rates rise, the feds will have to come up with more and more interest payments. Our politicians are so absolutely craven and despicable. Inflation hurts the poor and the middle class. They don’t care about those people. And Joey depends is the worst. He only cares about himself, when he remembers who he is.

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Gee, you mean "Build Back Better" is fucking stupid. I'm shocked.

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“Let’s hope the government doesn’t try price controls”

And

“The government will subsidize childcare while mandating higher wages for staff”

Aren’t mandated wages price controls? The government in this case is trying to control the price of childcare labor.

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One thing to always remember is that inflation is indistinguishable from a flat tax that everyone pays. What’s the difference to you if the government taxes your income another 5% or if your income buys 5% less goods?

Naturally, wealthier people have assets (real estate, stocks, etc) whose values rise with inflation, cushioning the blow. Poor people are just shit-outta-luck…therefore inflation is effectively a massively regressive tax (the metaphor holds for government revenue too…more inflation means more tax revenue from income, sales and real estate taxes while simultaneously reducing the “value” of government debt). Joe Manchin 100% understands this…

Remember that went wealthy progressives push policies that supposedly help the poor while simultaneously generate inflation, which negates those benefits to the poor while magically “inflating” their assets…

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I just want to say that I have subscribed to Bari in a large part because of the truly informative comments I read. They are very thoughtful and not at like the echo chamber retorts in most others comment forums. Please continue to teach me and keep me on my toes.

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This administration will only blame Trump for what's happening. I just hope the voters will see through it.

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Thanks for the clear explanation of what’s going on with inflation.

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Well it's fashionable for the egg heads to blame the masses... But I would argue that pretty much all of our economic problems including the disparity between rich and poor can be traced to the Federal reserve and Washington with its armies of ivy League educated economist who really only excel in the art of hindsight and are entirely detached from The real world.

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I couldn't be happier. I saved as much as I could when I was working; of course, now my money's value will go down with everybody else's, but I'll make it. Biden voters, who tend to not be savers, will be desperate quickly and get a little glimpse of the (apocryphal) Jefferson quote: "If your government is big enough to give you everything you want, it is big enough to take away everything you have." Even the Democrat politicians know they have screwed the pooch and are abandoning ship as fast as their little ratty legs will carry them. Two terms under a much-wiser and less naïve Chief Executive Trump, and we may just make it. Assuming we make it to 2024 ....

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In 1980, the CPI for the year was about 14%. Paul Volcker, Chairman of the Federal Reserve, in an attempt to break the back of inflation had raised the Fed Funds rate to about 19%. Shadowstats.com tracks CPI as it has been calculated at various times. The latest 2021 CPI reading if calculated under 1980 methods is about 15%. Higher than in 1980. In contrast, in 2021 the Fed Funds rate is effectively 0%. In addition, for well more than a year, the Federal Reserve has purchased $120 billion per month to maintain historically low (5000 years) rates of interest across the curve and for mortgages. 14% / 19% in 1980,versus 15% / 0% in 2021, transitory indeed.

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I find the jobs thing very interesting. Some states shut down topping up unemployment in June and according to what I've read they didn't see big changes in employment numbers, in comparison to states that kept the payments high. (The Economist Money Talks)

I suspect there are many factors, not one or two.

Have people figured out how to make do from quarantine times? Kids moving back in with parents, but working from home. Going out less? Going hiking instead of going to the theatre or nightclubs? Cooking instead of eating out?

Did the pandemic accelerate some people's plans to retire? I have a friend that did.

My son works at a locally owned pizza place. They don't have any problems finding employees. The owner pays decently and treats the employees well. If they have a particularly tough day, he comes in and gives out bonuses right then and there.

Another son works for a company that pays little over minimum wage for hard, dangerous manual labor (fighting wildfires). The company execs fly around in jets, they invest little in their workers. They can't get or keep workers. Gee, I wonder why...

Could it be that we've cut out immigrants who used to work minimum wage jobs and kept wages low? That's what's happened in the UK. Most of their truck drivers were immigrants from eastern Europe.

The biggest danger in inflation is the expectation that prices will always increase. If people stop buying, demand drops and prices stabilize.

That won't be true for housing...there's a real shortage of supply which will take years to change. It also isn't true for health care which is in the hands of rent seeking monopolists.

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Excellent piece and advice. “High prices are the cure for high prices”. IF THE GOVERNMENT STOPS EXACERBATING THE PROBLEM!!

Loved “Marie Kondoing” phrase.

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"Where did all that demand come from? In its response to the pandemic, the U.S. government"

And this created inflation in the EU? In the UK? In AU? In Korea?

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