Inflation Just Hit a 13-Year High. Here’s Why You Should Care

It hurts the working class in these key ways.

By Bradley Polumbo Published on July 15, 2021

While price inflation has many causes, we can trace much of the current surge back to the policy of the Federal Reserve, the central bank controlling the supply of US dollars. The Fed essentially created trillions of new dollars to pump into the economy in the name of “stimulus.”

“The quantity of money has increased more than 32.9% since January 2020,” FEE economist Peter Jacobsen explained in May. “That means nearly one-quarter of the money in circulation has been created since then. If more dollars chase the exact same goods, prices will rise.”

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This policy-fueled price inflation is more than an abstract economic phenomenon. It means that average Americans, barring those who have seen big wage increases over the last year, are significantly poorer than they were before.

The typical person’s standard of living declines as a result of price inflation, because what really matters is not what number appears on your paycheck but what that paycheck can buy you. Working-class Americans suffer tremendously when their energy bill increases by nearly 25 percent in just one year, for example.

Plus, all those who have saved money in their bank accounts — whether for college, retirement, a rainy day fund, etc. — have had their real wealth eroded by this inflation.

Of course, the current rate of price inflation, while high, is still significantly short of the kind of hyperinflation that can ruin whole economies. And no one can predict with certainty what inflation will be in the future.

But the current levels of price inflation plaguing our economy are seriously harmful. Don’t forget the many ways price inflation hurts real people, or that we can ultimately trace much of it back to the decisions made by government policymakers.

Originally published at FEE.org. Republished with permission.

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