First a little history lesson from just over one year ago: June 22, 2021
WASHINGTON (AP) — Federal Reserve Chair Jerome Powell on Tuesday responded to concerns from Republican lawmakers about spiking inflation by reiterating his view that current price increases will likely prove temporary.
Consumer prices jumped 5% in May (2021) compared with a year earlier, the largest increase in 13 years.
Yet other officials echoed Powell’s views. Also on Monday, New York Federal Reserve Bank President John Williams, who also serves as vice chair of the Fed’s policy making committee, said that currently high inflation is likely transitory.
“I expect that as price reversals and short-run imbalances from the economy reopening play out, inflation will come down from around 3% this year (2021) to close to 2% next year (2022) and in 2023,” Williams said.
Again, those quotes were from June 2021. Back then, people were worried that inflation had ‘spiked’ to 5% in May. Now that looks like the good old days. A year later, inflation is 9.1%. Close to double what it was when it was labeled a ‘transitory’ and ‘temporary’ problem by the Fed Chairperson and his compadres.
Back to my favorite chart, updated for the latest data:
Inflation lags behind M2 growth. So while M2 growth has slowed, it is still high and all that created money isn’t going away: it’s chasing a fixed (in the short run) quantity of goods and services. We’ve got a bit more ‘transitory’ to go. Maybe quite a bit.
But enough economic theory: let’s get personal. As in personal finance.
Suppose you had a $20 bill in your wallet in January of 2017. After 4 years of Republican mismanagement of the economy, that bill was worth $18.61. Inflation eroded your $20 by $0.029/month. For those younger readers who may not have had decimals included with their DEI training in school, that is a little less than 3 cents.
Now suppose you had a $20 in your wallet in January of 2021. After 18 months of a much more effective, equitable, diverse and inclusive administration, that $20 is worth $17.61. Inflation has eroded your money by $0.137/month. (For you DEI non-mathematicians, that is about 14 cents. I realize math is racist and I don’t want to discriminate). Shrinking over 4 times faster.
But hey, it’s ‘transitory’. Mass transitory to the poor house for savers.
Rich Freggiaro Cycling Blog 