January 15, 2022
From Fight Back News

San JosĂ©, CA – On Wednesday, January 12 the U.S. Bureau of Labor Statistics reported that prices of consumer goods rose 7% in 2021. This is the highest rate of inflation in 40 years. With workers’ wages only up by 4.7% last year, the purchasing power of workers’ earnings fell by more than 2%.

One important cause of higher prices was the continued impact of the COVID-19 pandemic. While spending on services, which involve more human contact and a greater possibility of infection lagged, spending on goods surged. This was the case for used cars, where prices went up 37.3% last year, as travel on mass transit declined. In New York City, transit rides were still 50 to 70% lower than before the pandemic.

The pandemic is continuing to cause disruptions in supply, which are also contributing to higher prices. Shortages of computer chips is a disruption of new cars, each of which can use a thousand chips or more. Limiting the supply of new cars also limits the number of used cars for sale as people hang on to their current cars.

The growing power of a handful of giant corporations that monopolize more and more markets is also contributing to higher inflation. Take a look at beef prices, which rose 18.6% in 2021, more than twice as fast as food prices in general, which rose 6.3%. Four giant meat-packing corporations now control 85% of the market for beef, up from 36% 40 years ago. This market power allows them to raise prices for consumers while at the same time keep down what they pay ranchers for cattle. This has led ranchers, who once got about 60 cents for every dollar spent on beef, last year getting less than 40 cents. While ranchers are going out of business, meat packers are making massive profits.

Federal government borrowing and spending in this latest crisis was about three times as large as the stimulus after the 2008 financial crisis. This came in the form of support for businesses, the unemployed, and relief checks for most of the population. Almost all of this was available for spending, unlike 2008, when large amounts of aid went to ailing financial institutions.

Last but still important was the massive money printing by the Federal Reserve. In the six years after the 2008 financial crisis the Fed created about $3.5 trillion in money to buy U.S. government and mortgage-backed bonds. But most of this money, about $2.6 trillion, just sat in banks as “excess reserves” meaning that the money wasn’t being lent out and spent. This meant low inflation. In just two years since the start of the pandemic, the Fed has printed even more money, about $4.2 trillion. Again about $2.6 trillion of this is sitting in banks, but much of that money created is being loaned out and spent, at five times the rate after the 2008 financial crisis, contributing to higher inflation.

Source: Fightbacknews.org