Between January and September of 2001, the U.S. inflation rate has more than doubled from 1.6% in January to 3.9%. Gasoline and food prices seem to be leading the way to the higher inflation figures. However, Federal Reserve Bank M1 and M2 figures also prove the money supply is growing as well, proving that the government is printing money to cover debts and to pay for costs beyond what tax dollars are able to generate.
Although some of the food price inflation rates seem very serious right now, with many hefty price increases or even downsizing of some products. Some ice cream products for example have downsized by 2oz. such as products distributed by Nestle’s Northwest distributor, while other brands such as Ben & Jerry’s instead raised their wholesale prices as commodities such as dairy products crept up to high price levels.
The current recession is a strange one, because it is also characterized by high inflation. During many periods of economic recession or depression, prices actually tend to decrease and go down. Prices are supposed to be somewhat influenced by supply and demand, however other factors such as war spending, the Federal Reserve Bank growing the money supply all help to create conditions that can spur inflation.
As serious as the economic problems are right now, the 1980-1982 inflation and resulting recession were far more serious yet. The inflation rate peaked at an annual rate of 14.8% in March of 1980, and the Federal Reserve Board acted to tighten the money supply and raised interest rates, which only allowed that nation to slip into a more serious recession that last until 1982.
Although, the current wave of inflation and economic problems seem serious enough to many Americans, helping to spur economic protests such as the Occupy Wall Street movement recently, many Americans fail to grasp that these current economic problems are not as serious as past recessions or that the current economic problems are far more complicated than most can comprehend. But, that’s probably of little consolation to an angry public caught in rapid price increases, joblessness or a feeling of a lacking empowerment over their lives. It also doesn’t act as a good omen for the current administration seeking to be re-elected. It becomes an easy solution for the public to fire the chief executive during economic bad times, hoping for a better economy from another chief executive.