Is That An Inflation Chain-Reaction?

The US is experiencing a multi-generational inflationary event. This is highly problematic because most people have no relevant experience with such inflation as they haven’t lived through one. This makes their perceptions, expectations, and reasoning about Inflation vulnerable to a far more prevalent and problematic problem: Placing the Blame.

The problem with anyone’s decision in “Placing the Blame” is that it is a decision that depends upon a proper and informed understanding of the situation(s), facts, and causal relationships involved in the creation of the economic state that one is reacting to. If reactions by the public, businesses, policy makers & experts, political leaders, and you are not rationally aligned with a sound understanding of why we are where we are, how we got here, and what we can/should do; then are we sufficiently ‘smart’ enough to assign “Placing the Blame?” Note: It is well recognized that high Inflation has significant harmful impacts upon many peoples’ lives, even leading to tragedies for some. Those harmful effects to individuals and to the nation overall are the very reasons that inflation is an issue that must be monitored, attended to, and managed for any nation’s economic good.

This then is another opportunity to test: “How Smart Is America?” on Inflation.

And … Begin.

Question 1: Which factor/factors can produce inflation: Supply, Demand, Interest Rates, Economic policies, Global/National/Regional/Local events & conditions?

Question 2: Is Inflation always harmful to an economy or can it also be beneficial?

Question 3: Do or can some businesses benefit from Inflation?

Question 4: Would authority to directly control Inflation be good to give a nation’s leader?

Question 5: Inflation causes Consumers and Businesses to change their behaviors. Does that indicate that Consumers and Businesses may increase and decrease Inflation?

It might have taken more than just a second to answer every question, but surely not most. Afterall, the current historically high Inflation rate must have caused you to think about Inflation before now. And, if you are angry, frustrated, and fearfully about what Inflation is doing to you such that you are ready to take part in the “Placing the Blame” decision then you must have engaged in some assessment of what warrants assigning the ‘blame’ to the ‘place(s)’ that you have chosen to direct it. [Well, I am assuming that you were not just following a predetermined belief-system answer to any situation which you do not like.]

Answer to Question 1: All of these factors, plus more, can be what causes Inflation. The first two: Supply and Demand, are basic components of economic theory that can help connect conditions and actions which are used to explain what is increasing or decreasing inflationary changes.

Answer to Question 2: Inflation can be either. It can even be both simultaneously. However, high-inflation, particularly if it is across the whole economic system, is harmful immediately and for an extended period of time afterward. Note: Negative inflation (aka, deflation) can also be bad or good.

Answer to Question 3: Yes. Just consider the oil & gas industry at this moment. There are companies that will reap huge benefits from the current inflationary environment. This doesn’t mean that they could not benefit more by taking actions which help mitigate and limit inflation, but that requires that they are savvy (a fancy word for smart) enough to see how to accomplish that advantage.

Answer to Question 4: No. Most governments have policies and institutions which are assigned the task of maintaining a productive and resilient economy and those entities work to managing inflation. However, rational governmental systems do not grant the executive(s) with a fiat-control over their economy on the premise that the leader can use it to ‘control’ things like Inflation. [I find the concept that politicians are even remotely qualified to make informed and prudent decisions for ‘controlling’ inflation as patently absurd and moronic. Why would the public expect competency in this area when there is little to no evidence politicians can adeptly perform rather modest tasks effectively?]

Answer to Question 5: Yes. Consumers can act to mitigate inflation both increasing it and decreasing it. Businesses also have comparable means that can be employed to manage how inflation affects their business. This doesn’t mean that Consumers and Businesses have complete controls sufficient to deal with Inflation, but they are not devoid of any lever(s) they might choose to use.

I don’t know how you did, but the general opinion reflected in news entities’ polls on the US Economy and Inflation would indicate that the public is quite angry about Inflation and the government not “doing” something to ‘fix’ it. The disconnect between being able to pass this test and holding to the notion that ‘the’ government should fix it and fix it now is irrational. The government does hold some responsibility for the Inflation. Whether the part the government is responsible for is sufficient to matter in ‘controlling’ it is rather dubious, at least in the short term. Most governmental actions are either dependent upon a long-term period to act or a excessively short-term impacts that do not alter the underlying causal factors necessary to control Inflation.

America’s test results: C-/D+. As is often the case, the public emotional response and their comprehension of the issue(s) are tenuously connected or not connected. One might even say that the Inflation crisis is partly resulting from America just: “Not Accepting Responsibility” for its own behaviors.