Inflation

Subterms

    More stories

    • 200 Shares169 Views

      in US Politics

      ‘What am I going to do?’: soaring prices fuel calls for US government to step in

      by

      ‘What am I going to do?’: soaring prices fuel calls for US government to step inLarge corporations are passing on higher-than-needed price increases to customers under the cover of inflation, war and supply chain squeezes, experts say Outside a Dollar Tree in Detroit, Latasha Holmes lamented the rising cost of toilet paper, beverages, food and other items she had just purchased. The price increases, she said, were forcing her to choose among necessities for her and four kids.“What am I going to do? Prices are up everywhere, all over town,” she said. “I can’t afford everything.”But while Holmes struggles, Dollar Tree thrives. The retailer increased its prices by 25% as profits jumped 269% between 2019 and 2021, and its profit margins widened. Shareholders won too. The company also announced a stock buyback program worth $1bn that will deliver cash from those price increases to its investors.Dollar Tree and other large corporations are juicing profits by passing on higher-than-needed price increases to customers like Holmes under the cover of inflation, war and supply chain squeezes, consumer advocates and economists say. They are calling for the federal government to take bold steps to rein in the companies.Revealed: top US corporations raising prices on Americans even as profits surgeRead moreAmong proposed prescriptions are price controls, improved price fixing rules, commodity market intervention, stock buyback regulation and antitrust enforcement. Ranged against those proposals are a powerful business lobby and a divided Congress that seems unable to pass major legislation.“There are reasons to have a profit incentive, but there are also reasons to have an overall regulatory body that can say, ‘This is actually profiteering … while everyone is hurting,’” said Krista Brown, a policy analyst with the American Economic Liberties Project.A Guardian analysis of 100 top corporations’ Securities Exchange Commission filings found a median increase of 49% in profits between the most recent quarter and the same quarter two years ago, pre-pandemic. It shows companies have largely shielded themselves from inflationary pain by passing most or all of their increased costs on to customers via price hikes.So far, the federal government’s most visible attempt to address inflation has been to increase interest rates, rates look set to rise again this week. But the Guardian’s data suggests such a measure may miss an important mark. Raising rates effectively takes money out of consumers’ pockets to cool the economy.If corporate profits are contributing in a meaningful way, then raising rates would only reduce the amount of money people have to spend on products and services for which prices are still going up.“That would mean you’re exacerbating this dynamic instead of doing anything to help it,” said Isabella Weber, University of Massachusetts Amherst economist.Instead, limited and targeted price controls could work for essentials like bread, she said, but stressed those would have to be coupled with a bailout plan for negatively affected companies.“Increased prices for basic items like bread can exert enormous pressure on wages” and send inflationary ripples throughout the economy, Weber added. Though price controls are controversial and generally regarded as a leftist idea, the last president to enact them was Richard Nixon, who imposed a 90-day freeze on wages and prices to address inflation in 1970. Price controls were also enacted during and following the second world war, when, again, supply chain issues and pent up demand led to soaring prices.Table of 100 US companies’ profit growthBut price rises are not the only issue critics would like to see the Biden administration address. Others, like Groundwork Collective’s executive director, Lindsay Owens, have called for a ban or new restrictions on stock buyback programs. Joe Biden’s 2023 budget proposes prohibiting executives from selling their stock three to five years after enacting a buyback program.“The other big winner besides the shareholders in excess cash that’s going to buybacks are the executives,” Owens said. “They announce the buybacks, their stock prices soar, then they sell their shares and there are a number of ways to make this work better.”The Guardian’s analysis found companies’ buyback programs over the last 15 months totaled $544bn. That cash could have been reinvested to keep prices down, or increase workers’ wages, consumer advocates say.Others levelled accusations of price fixing and gouging. The American Economic Liberties Project is helping draft legislation that would make it easier for businesses to sue companies for price fixing by making private corporate communications more accessible. As of now, only 3% of price fixing cases make it to trial, Brown said.“Reinvigorating price fixing laws and going after price gouging in moments like this, where a war or Covid are used as excuses for companies to raise rates just because they can, could help a lot,” she added.Fixing is especially a problem in highly consolidated industries, consumer advocates say. Companies have benefited from “decades long under-enforcement of consolidation laws”, added Martin Schmalz, an Oxford University economist.Just four companies control most of the US beef industry, four airlines control about 80% of domestic passenger traffic, Walmart accounts for the majority of grocery sales in the majority of US states, the list goes on and on.And it’s not just the companies that have outsized control. Large investors also a role to play.Schmalz pointed to the Investment Company Act, which limits investment funds to holding no more than 10% of a corporation’s securities. Vanguard on average holds 10% of all S&P 500 companies, Schmalz research has found, but it is not violating the law because companies within its fund family own the shares, not Vanguard itself. But Vanguard still executes the voting rights of more than 10% of shareholders.“The law is written at the fund level so technically speaking they don’t violate the law, but they are violating the spirit of the law,” Schmalz said.Economists and attorneys working on US antitrust law have proposed prosecuting mutual funds like BlackRock or Vanguard that own large stakes in multiple companies in the same sector. Such shareholders can exert an outsize influence on companies’ pricing decisions, Schmalz said, and he noted Investment Company Act language that specifically targets this scenario: “The national public interest … is adversely affected … when investment companies [have] great size [and] excessive influence on the national economy.”Schmalz said there’s little discussion among policymakers to address that specific issue.Biden’s budget includes over $220m for antitrust enforcement, and bills that would break up large tech companies have bipartisan Senate and House support.The Guardian’s analysis highlighted the commodity market boom as companies trading in grain, steel, mining, wood, rubber, meat, oil, homes and other materials generally recorded higher profit increases than companies across the rest of the economy.However, many commodity companies operate in what analysts characterize as “feast and famine” cycles in which they’re unprofitable for years before cashing in. The pendulum has swung for many commodity companies in the day’s economic climate.“When there’s a chance to raise prices when markets are tight, companies are going to do so,” said Skanda Amarnath, executive director of the Employ America thinktank. “It’s some part opportunistic, some part greed, some part rationality, some part a response to uncertainty.”The oil industry highlights the dynamic. After seven years of low returns, it’s restricting supply to boost profits regardless of how that hits Americans at the pump. Earnings calls transcripts reveal executives eagerly “putting shareholders first” and an investor who described industry-wide supply suppression “one of the delights of this earnings season”.Bar chart of the monthly change in US wages since January 2019Bringing volatile commodity prices under control would require curtailing uncertainty and building supply chain resiliency, analysts who spoke with the Guardian say. That could involve some degree of government intervention to cut down on risk by establishing a floor on commodity prices. The government could do that by effectively becoming the “buyer of last resort” when material prices dip below a certain level.But the government should also set a ceiling above which it collects profits, said commodities analyst Alex Turnbull. He suggested the federal government set up what’s effectively a state reserve board.Turnbull pointed to lithium, which, amid increased demand for EV batteries and supply chain squeezes, jumped from $5,000 a ton to $45,000 a ton last year. Higher prices impact the pace of the clean energy transition, and the government could hypothetically set a $10,000 a ton floor price and $25,000 a ton ceiling that would limit the volatility, Turnbull said.The federal government could also increase stockpile reserves of products like grain or oil that are released when prices spike.“That sends the message ‘You should plant more wheat because if it goes really bad, you might have a lean year or two, but we will buy your wheat. But on the other hand don’t expect to buy a Lamborghini if you’re a farmer in Iowa because when prices get too high we’ll be out there selling the shit out of our stockpiles,’” Turnbull said.Stabilization may also spur investment in raw material production that’s risky, which would further bolster markets against future supply shortages. Few companies have built steel plants in recent years because the prices have been so low, Turnbull noted, and now the world is short on steel.Though price caps are “not politically palatable” Bespoke Investment analyst George Pearkes said, the government could take a number of measures to steer futures curves and markets for raw commodities like oil and wheat.“Something in between where there are strategic efforts to smooth volatility, and provide the private sector with enough certainty that they can make decisions is a lot more compelling,” he said.Spikes in investment for some commodities, like nickel, that are essential to the clean energy transition, can be a positive development, Turnbull said. Mining companies limped through the several years leading up to the pandemic, but reaped windfalls over the last year.“People say ‘Nickel producers are making too much money’, well, they didn’t make money for a decade,” Turnbull said. “At some point, somebody has to put money down to dig holes because people aren’t going to drive to the middle of fucking nowhere with a truck and work for free.”Another force in some commodity price spikes: Wall Street speculation. Commodity markets were once heavily regulated because they deal in raw materials that underpin the economy. An influx of investment capital followed the commodity markets’ deregulation about 20 years ago, and some are now treated like speculative assets similar to bitcoin, said Rupert Russell, who authored a book on the topic.The consequences of economy-addling commodity price spikes are real, he adds, pointing to the 2010 grain prices that helped trigger the Arab spring uprising in Tunisia.Supply chain back ups, inflation and war have generated “radical uncertainty” in which no one knows how much commodities are worth, because the prices are no longer anchored, Russell told the Guardian. He echoed others’ calls for stronger government intervention to tamp down the casino-like mentality.“Once there’s not just radical uncertainty but markets dominated by speculators, algorithmically driven speculation that is just kind of responding to headlines, then you’re going to get that kind of Bitcoin-esque volatility,” he said.But experts say there are few viable short-term solutions, and long-term measures don’t help Holmes. That’s forcing her to think about getting another job to survive as she feels the pressure of an economic system stacked against her.“I don’t want to. I’ve got four kids to take care of, but what am I supposed to do?” she asked.TopicsUS economyInflationEconomicsUS politicsUS income inequalityInequalityfeaturesReuse this content More

    • 175 Shares129 Views

      in US Politics

      Democrats announce plans to ‘go after’ big oil in effort to bring down prices

      by

      Democrats announce plans to ‘go after’ big oil in effort to bring down pricesNancy Pelosi says oil companies ‘hoarding the windfall while keeping prices high at the pump’ amid concerns over US inflation The Biden administration is to propose legislation that would allow US federal and state agencies to “go after” oil companies on wholesale and retail sales practices, lambasting the industry over price gouging and profiteering.As American voters express increasing concerns about the high prices of a wide range of consumer goods, including energy and food, Senate majority leader Chuck Schumer said passing legislation to bring down retail gasoline prices “is at the very top of our list”.‘We’re not attacking Russia,’ Biden says as he asks for $33bn in Ukraine aid – liveRead moreNeither Schumer nor House speaker Nancy Pelosi would say when such legislation will be voted upon, or how much money it could end up saving consumers if enacted into law.“Big oil has profiteered and exploited the marketplace,” Pelosi told reporters, noting companies’ strong corporate profits over the past year. “They are hoarding the windfall while keeping prices high at the pump,” she added.The move comes as gas prices have surged in the wake of Russia’s invasion of Ukraine. Despite recent falls, the average price of a gallon of gas is now over $4 in the US, up from $2.88 a year ago, according to the American Automobile Association.Oil companies have enjoyed record profits as prices have soared. Exxon, the largest US oil company, is expected to report record earnings on Friday and rival Chevron recently reported “the best two quarters the company has ever seen”.Pelosi said the White House had discussed a “holiday” for Federal gas taxes but said that there was no evidence that oil companies would pass those savings on to consumers.Oil companies are not alone in reporting huge surges in profits even as consumers face higher bills thanks to soaring inflation. An analysis of 100 leading US companies found their net profits had risen by a median of 49%, and in one case by as much as 111,000%. The increases came even as prices rose and average wage increases were eroded by rising inflation.Reuters contributed to this storyTopicsOil and gas companiesUS politicsBiden administrationInflationEconomicsEnergy industrynewsReuse this content More

    • 163 Shares159 Views

      in US Politics

      Up, up and away: will rising prices blow Democrats’ midterms hopes off course?

      by

      Up, up and away: will rising prices blow Democrats’ midterms hopes off course?Inflation hit 8.5% in March as a mix of post-pandemic demand, price gouging and the Ukraine war dragged down Biden’s ratings In the days leading up to the release of the US labor department’s latest inflation report, the White House tried to deflate expectations. White House officials said they expected the March inflation rate to be “extraordinarily elevated” because of rising gas prices, driven largely by war in Ukraine.Unfortunately for Joe Biden and his fellow Democrats, they were proven right. The inflation report, released on Tuesday, showed US prices increased by 8.5% between March 2021 and March 2022 – the highest level of US inflation since 1981.US inflation climbed to 8.5% in March, highest rate since 1981Read moreThe White House tried to downplay concerns last year by arguing price increases were caused by the coronavirus pandemic and would prove “transitory”. Now, more than a year after vaccines became widely available, Democrats are grappling with how to help families struggling under the weight of inflation. Centrists and progressives alike warn that unless Democrats come up with an effective plan, Republicans could be on the way to a historic victory this November.Democrats’ prospects in the midterm elections were already considered lackluster at best. The president’s party usually loses seats, particularly the House, in midterm years. Democrats have very little margin for error, given slim majorities. Biden’s approval rating, in the low 40s for months, is not helping matters.Republicans are clearly aware of the opportunity they have. On Tuesday, hours after the inflation report was released, the Senate minority leader, Mitch McConnell, said the “atmosphere for Republicans is better than it was in 1994” – when the party flipped eight Senate seats and gained a net of 54 House seats.“From an atmospheric point of view, it’s a perfect storm of problems for Democrats because it’s an entirely Democratic government,” McConnell said.Voters’ concerns over inflation are certainly contributing to Democrats’ electoral woes. A CNBC poll this month showed 48% of Americans chose inflation as the number one or two issue facing the country, making it the most common answer among respondents.“This issue is top-of-mind for voters,” said Kelly Dietrich, chief executive of the National Democratic Training Committee, which trains candidates. “I think it’s going to stay top of mind because it directly affects them every day. And successful candidates need to address it directly.”The White House has tried to deflect criticism over inflation by blaming high gas prices on Vladimir Putin and the war in Ukraine. Speaking in Menlo, Iowa, on Tuesday, Biden noted that more than half of the March inflation was caused by the rise in gas prices.“Even as we work with Congress, I’m not going to wait to take action to help American families,” Biden said. “I’m doing everything within my power, by executive orders, to bring down the prices and address the Putin price hike.”Biden has indeed taken steps to curb gas prices. He announced on Tuesday that his administration would approve an emergency waiver to expand use of biofuels, and he has pledged to release a million barrels a day from the US Strategic Petroleum Reserve, for the next six months.But the price increases the country has seen extend well beyond gasoline, and economists warn that inflation will probably remain elevated in the coming months.Austan Goolsbee, an economics professor at the University of Chicago who chaired the Council of Economic Advisers under Barack Obama, said: “There are two questions. One is, is this peak inflation? But even if it is peak inflation and the numbers are coming down, what are they going to come down to?”Goolsbee noted that so-called “core inflation”, which excludes the more volatile prices of gas and food, rose by just 0.3% last month. That increase was less than most economists expected, providing some hope of inflation cooling off in the near future.“That was a welcome surprise, but I don’t think anybody should kid themselves,” Goolsbee said. “There’s a long way to go before prices, inflation would be anywhere considered back to normal.”For Democrats, that likelihood means their approach has had to change. Instead of claiming price increases will prove temporary, Democrats are acknowledging the reality of tightened budgets and trying to make a case for how they can help.“The good news is the entire Democratic party is very focused on inflation,” said Gabe Horwitz, senior vice-president of the economic program at Third Way, a center-left thinktank. “We are well past this time last year, when there was a question over whether it was going to be transitory or not. It’s here, it’s real, it looks like it’s going to stay at least for a little while.”As Democrats look ahead to November, strategists are urging candidates to pitch an economic vision that will both improve working Americans’ finances and mobilize voters.“First and foremost, American families need help,” Dietrich said. “Secondly, to get them more help Democrats need more wins to improve our standing to continue these policies.”But enacting those policies has proven difficult. The Build Back Better Act, a $1.9tn package that included provisions to lower healthcare and childcare costs, stalled in the Senate due to opposition from Joe Manchin, a centrist Democrat.The West Virginia senator has been outspoken about his frustrations over high inflation, criticizing fellow Democrats who call for more spending as prices rise.“Here is the truth: we cannot spend our way to a balanced, healthy economy and continue adding to our $30tn national debt,” Manchin said on Tuesday, in response to the latest inflation report.Manchin’s stance has outraged progressives, who insist high inflation underscores the urgent need to pass Build Back Better and provide assistance to families.“Americans are being price-gouged. Inflation is hitting their bottom line, and the number one job of any politician is to raise the standard of living of their constituents,” said Joseph Geevarghese, executive director of the progressive group Our Revolution.Looking ahead to the midterms, Geevarghese added: “It’s already going to be very difficult to win, I think. And then you’ve got the obstructionists who are making it harder for the president and our party to prevail.”Horwitz said he remained optimistic that Democrats will be able to pass some version of Build Back Better that will lower costs for families. Manchin has indicated he would be open to a proposal if it did not add to the federal deficit. That would require Democrats to further trim spending but could give them a victory to sell to voters.“You can do both,” Horvitz said. “You can have a plan that raises a significant amount of money by changing the tax code, and you can use some of that money to pay down debt and deficits. And you can use some of that money for programs that alleviate inflation and help consumers.“It is not a slam dunk, but it is something that could happen. We’re going to know more in the next two months about how likely that is.”TopicsUS politicsUS midterm elections 2022InflationDemocratsJoe BidenJoe ManchinanalysisReuse this content More

    • 138 Shares189 Views

      in US Politics

      US inflation climbed to 8.5% in March, highest rate since 1981

      by

      US inflation climbed to 8.5% in March, highest rate since 1981War in Ukraine drives up energy costs as figures strengthen expectations Federal Reserve will raise interest rates next month Prices in the US climbed at their highest rates since 1981, rising 8.5% over the year to the end of March as the war in Ukraine drove up energy costs for Americans, the labor department announced on Tuesday.The latest Consumer Price Index (CPI) – which measures the prices of a basket of goods and services – comes after the index rose by 7.9% in the year through February, the fastest pace of annual inflation in 40 years.Driven up by continuing supply chain problems, soaring demand and rising energy prices, inflation is now at levels unseen in the US since Ronald Reagan took the White House from Jimmy Carter.Biden heads to Iowa to unveil plan to reduce gas prices as inflation soars – liveRead moreThe price increases are broad – with the cost of rent, gas and food causing particular hardship for lower income Americans and represent a major blow to the Biden administration, already facing tough odds of retaining control of Congress in November’s midterm elections.Soaring gas prices were the main driver of the rise. The gasoline index rose 18.3% in March and accounted for over half of all the items’ monthly increase. Gas prices have begun to fall, in a sign that some economists have argued may suggest inflation has reached its peak.The food index rose 1% in March compared with February, and is up 8.8% compared with the prior 12 months. Canned fruit and vegetable prices rose 3.8% from February to March, rice prices rose 3.2%, potatoes 3.2% and ground beef 2.1%.Andrew Hunter, senior US economist at Capital Economics, said energy prices would come down in the months ahead and there were signs that price pressures appear to be moderating.But, he added, the figures were likely to strengthen the Federal Reserve’s plan to increase interest rates as it struggles to tamp down inflation.“With Fed officials sounding more hawkish by the day, the March data won’t change their plans to up the pace of rate-hikes to 50 basis points per meeting from next month. Even so, it does support our view that, having been slow to realize that the initial surge wasn’t transitory, Fed officials are now being a bit too pessimistic about how quickly inflation will drop back,” he wrote in a note to investors.The White House warned ahead of the report it was expecting a bad set of figures. On Monday White House press secretary Jen Psaki told reporters that the labor department’s previous report had not included the majority of the jump in oil and gas costs caused by the Kremlin’s invasion of Ukraine.“We expect March CPI headline inflation to be extraordinarily elevated due to Putin’s price hike,” Psaki said.There are two versions of the CPI, one that includes all the prices consumers face and another – core CPI – which excludes food and energy prices, which tend to be more volatile. Core prices climbed 6.5% in the year through March, up from 6.4% in the year through February.The core index did suggest the pace of inflation was slowing, rising 0.3% from February, compared with 0.5% the prior month.Psaki said the administration expected a wide disparity between the two measures because of the soaring price of gas. Nationally the average price of a gallon of gas is now $4.11, compared with $2.86 a year ago, according to AAA.“At times, gas prices were more than one dollar above pre-invasion levels, so that roughly 25% increase in gas prices will drive tomorrow’s inflation reading,” Psaki said.Joe Biden addressed the latest inflation figures at a speech in Des Moines, Iowa, where he announced plans to use more ethanol in US fuel during the summer in an attempt to tackle high gas prices. “I am doing everything in within my executive power to bring down the Putin price hike,” he said. TopicsUS economyInflationEconomicsUS politicsnewsReuse this content More

    • 75 Shares149 Views

      in World Politics

      The Risk Posed by Global Inflation

      by

      Since the reopening of national economies after COVID-19 lockdowns, inflation has been rising around the world. This change in the macroeconomic environment caught policymakers off guard in terms of adapting inflation forecasting models and assessing the causes of this evolution. As a result, old debates have resurfaced about the risks and opportunities of inflation and how best to restore price stability.

      Despite the rapid surge, inflation was not totally unexpected since it is partially attributable to measures taken to reopen national economies, resulting in increased demand and disruptions of supply chains and production, says Archana Sinha, the head of the Department of Women’s Studies at the Indian Social Institute. In this sense, the current inflationary environment differs from the one in the late 1970s and may prove only transitory.

      COVID-19 Policies Carry Implications for South Korea’s Presidential Election

      READ MORE

      There are, however, other drivers of inflation that may prove more long-lasting. This includes, as Domingo Sugranyes of the Pablo VI Foundation points out, decarbonization and economic concentration, allowing excessive pricing power. Additional factors are rising property and stock prices, as well as the increase of raw material prices, Etienne Perrot explains.

      As a result, as Valerio Bruno mentions, central banks’ instruments, such as raising interest rates, may not suffice to reverse current inflationary pressures. Bruno, a researcher, says that we can “expect a long period of high inflation.” That being said, it is far from certain that central banks are willing to use these instruments because of their concern with financial stability that a selloff on financial markets may jeopardize.

      Embed from Getty Images

      From a socioeconomic perspective, Andrew Cornford recalls that inflation is not a “uniform problem” since its effects vary among countries, sectors and groups. The main problem, Bruno points out, is that “the wages of workers, in particular the middle class, suffer greatly from a declining purchasing power. If wages are not adjusted to inflation, consumptions and companies’ profits are affected, leading to a possible economic recession.”

      On the other hand, inflation may benefit debtors by depreciating their debts. However, Cedric Tille, a professor in macroeconomics, warns that “any persistent inflation will raise the cost of additional borrowing” in the future and therefore “any gain from inflation for some actors is likely to be temporary.” For instance, Sugranyes says, “many weaker debtors will find growing difficulty in refinancing at higher interest rates.”

      The current rise of inflation pressure may prove to be only temporary — not inflation in the pure sense — but it has to be taken seriously because it could dash hopes of economic recovery and weigh on the morale of populations exhausted by waves of social restrictions.

      By Virgile Perret and Paul Dembinski

      Note: From Virus to Vitamin invites experts to comment on issues relevant to finance and the economy in relation to society, ethics and the environment. Below, you will find views from a variety of perspectives, practical experiences and academic disciplines. The topic of this discussion is: What are the main threats, but also possibly the main opportunities, related to inflation?

      “… inflation is not new … ”

      “Inflation is not new; it was hidden behind rising property and stock prices, leading to properties disparities. As international competition has diminished, the rise in energy and raw material prices has a direct impact on consumer goods. Its social effects (on pensioners and various marginal groups), as well as its economic consequences for long-term investments (distortions) and interest rates (rise), must be taken into account. On the other hand, inflation favors, for a time, companies, indebted households and massively borrowing states. Debtors become more credible in financing the investments needed for the ecological transition”

      Etienne Perrot — Jesuit, economist and editorial board member of the Choisir magazine (Geneva) and adviser to the journal Etudes (Paris)

      “… any gain from inflation for some actors is likely to be temporary … ”

      “While inflation has a short-run benefit for debtors, one must bear in mind that these debtors will borrow additional amounts in the future. Any persistent inflation will raise the cost of these additional borrowing, including a term premium. Therefore, any gain from inflation for some actors is likely to be temporary. Looking through the inflation movements of the coming months, which hopefully will prove temporary, the reasons underpinning central banks’ mandates of symmetric price stability remain as valid as they have ever been.”

      Cedric Tille ­— professor of macroeconomics at the Graduate Institute of International and Development Studies in Geneva

      “… inflation does not entail any real benefit …”

      “Inflation does not entail any real benefit for most governments and businesses. Although debts may be depreciated in the long term, many weaker debtors will find growing difficulty in refinancing at higher interest rates and will see financial flows fleeing toward ‘safer’ harbors. There are objective reasons for cost increase, like decarbonization or restructuring of supply chains, which should lead us to admit that we are slightly poorer than we thought. Concentration also may allow business excessive pricing power. The vicious circle of inflation is an illusionary way of denying these facts, leading to even worse impoverishment. Some governments may be tempted to print money, [but] there will be growing pressure for automatic indexation of salaries and pensions. Difficult challenges!”

      Domingo Sugranyes — director of a seminar on ethics and technology at Pablo VI Foundation, former executive vice-chairman of MAPFRE international insurance group

      “… policy responses must address distributional dimensions … ”

      “Inflation is not a uniform problem. It varies among countries (high, middle and low-income), among income groups within countries, among goods and thus producing sectors (e.g., energy and primary commodities used for food), and amongst services (e.g., health-related, finance and travel). As is generally acknowledged, policy responses — both national and those involving international finance and aid — must address distributional dimensions, avoiding links to austerity and other attached conditions likely to increase poverty. In developed countries, policy design will frequently be handicapped by a lack of pertinent data, especially regarding wealth in the form of financial assets and tax liabilities. An option here would be a once-and-for-all capital levy high enough to help a government to deal with immediate increases in its financial liabilities, while leaving permanent solutions to the problem of enormous inequalities of wealth to be attained as part of a future response to longer-term needs and objectives.”

      Andrew Cornford — counselor at Observatoire de la Finance, former staff member of the United Nations Conference on Trade and Development (UNCTAD), with special responsibility for financial regulation and international trade in financial services

      Unique Insights from 2,500+ Contributors in 90+ Countries

      “… the risks of inflation far outweigh the possible benefits … ”

      “It seems to me that the risks of inflation far outweigh the possible benefits. To make effective use of the tools available to central banks, it would be necessary to understand the real causes of inflation (a ‘drugged’ financial economy, monopolies and oligopolies, or the costs of raw materials). Unfortunately, central banks’ instruments, such as raising interest rates, are not always sufficient to reverse this trend. We can therefore expect a long period of high inflation, with ‘classic’ safe-haven assets as gold reaching historic highs. The main problem with inflation is that the wages of workers, in particular the middle class, suffer greatly from a declining purchasing power. If wages are not adjusted to inflation, consumptions and companies’ profits companies are affected, leading to a possible economic recession.”

      Valerio Bruno — researcher in politics

      “… inflation at these levels is a cause for concern …”

      “Labor market conditions are improving but tempestuous, and the pandemic continues to threaten life and economic activity. The rapid reopening of the economy has brought a sharp advance in inflation. These are challenging times for the public. The dynamics of inflation are complex, and inflation can be assessed from a number of diverse perspectives, including the absence of inflation pressures; moderating inflation in high inflation items; wages; and long-term inflation expectations. Businesses and consumers widely report upward pressure on prices and wages. Inflation at these levels is a cause for concern. This assessment is a critical and ongoing one as we continue to monitor inflation data against each of these perspectives.

      Archana Sinha — head of the Department of Women’s Studies at the Indian Social Institute in New Delhi, India

      *[An earlier version of this article was published by From Virus to Vitamin.

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

    • 163 Shares159 Views

      in US Politics

      Tackling inflation is ‘top priority’, says Biden in State of the Union address

      by

      Tackling inflation is ‘top priority’, says Biden in State of the Union addressPresident acknowledges ‘too many families are struggling’ as climbing prices hit him in polls Getting runaway prices in America under control is “my top priority” Joe Biden told Congress on Tuesday in his first State of the Union address.Soaring inflation – now at a 40-year high – has hurt Biden in the polls and the US president bluntly acknowledged “too many families are struggling to keep up with the bills. Inflation is robbing them of the gains they might otherwise feel”.Tell us: how are rising US prices changing the way you shop, work and live ?Read moreThe US has added 6.6m jobs since Biden took office and the unemployment rate has dropped to 4%, down from a pandemic high of 14.8% in April 2020. But soaring inflation has overshadowed his economic successes, rising at an annual rate of 7.5% over the year through January.Biden said he would cut energy costs, the price of prescription drugs, and childcare in the US while ​​increasing competition between companies and making sure “corporations and the wealthiest Americans start paying their fair share”.“Economists call it ‘increasing the productive capacity of our economy’. I call it building a better America,” said Biden.Biden’s plans face heavy headwinds. On Tuesday, oil prices spiked again, passing $100 a barrel again as the war in Ukraine escalated. The rise will further increase costs for US consumers who are already paying high prices at the pump due to Covid 19-related issues. The average gallon of gas in the US was $3.61 as of 1 March, compared with $2.72 a gallon one year ago.Many of Biden’s initiatives will also struggle to pass in a deeply divided Washington as the US heads into midterm elections this November, with polling suggesting Republicans could take control of Congress.TopicsJoe BidenInflationUS politicsEconomicsUS economyDemocratsnewsReuse this content More