Remember, the only choice is optimism, the pessimists never get it right.
Inflation was back in the news as the apocalypse du jour of the week. When the consumer price and the producer price indexes were reported last week and the numbers were higher than the pros had guessed, the eruption of the talking heads was predictable.
The attached article, “Transitory Inflation is Just Part of the Covid-19 Recovery” offers a good explanation about the nature of inflation. We must remember, June 2020 looked a whole lot different than June 2021. Unemployment was off the charts, companies shut down and supply chains needed much more than one or two missing chain links.
So, when we look at June 2021’s numbers, it’s an “apples to oranges” comparison. Last year’s numbers were barley off the bottom and this year’s numbers are reflecting a very strong emerging economy with declining unemployment and a labor shortage.
One of the bedrock principles of economics is the law of supply and demand. If there’s lots of demand and little supply, prices go up and, conversely, lots of supply and little demand, you would expect and see prices decrease.
So, when we compare this year’s numbers with last year’s and with supply chains being rebuilt and restructured creating shortages, inflation is temporary.
Here is my definition of inflation: “How much money do I have left at the end of a month or how much month do I have left at the end of the money?”
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