Inflation worries soar with 85% of Americans somewhat concerned: poll

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via NYPOST:

A substantive majority of Americans said they are “somewhat concerned” about inflation and about four out of 10 people believe the government might not be able to rein it in, according to a new poll released Tuesday.

Eighty-five percent said they are “somewhat concerned” and of that group, 45 percent said they’re “very concerned” about inflation, The Hill reported on Tuesday, citing a Harvard CAPS/Harris poll.

The Labor Department’s consumer price index showed that inflation has risen 5 percent since last May — a 13-year high — as companies struggle to keep up with a surge in demand following the coronavirus pandemic lockdowns.

 

THAT ’70S SHOW: The Looming Stagflationary Debt Crisis.

In April, I warned that today’s extremely loose monetary and fiscal policies, when combined with a number of negative supply shocks, could result in 1970s-style stagflation (high inflation alongside a recession). In fact, the risk today is even bigger than it was then.

After all, debt ratios in advanced economies and most emerging markets were much lower in the 1970s, which is why stagflation has not been associated with debt crises historically. If anything, unexpected inflation in the 1970s wiped out the real value of nominal debts at fixed rates, thus reducing many advanced economies’ public-debt burdens.

Conversely, during the 2007-08 financial crisis, high debt ratios (private and public) caused a severe debt crisis – as housing bubbles burst – but the ensuing recession led to low inflation, if not outright deflation. Owing to the credit crunch, there was a macro shock to aggregate demand, whereas the risks today are on the supply side.

We are thus left with the worst of both the stagflationary 1970s and the 2007-10 period.

Fed’s Bullard Says Inflation in 2022 May Be Higher Than Expected

A recent burst of inflation could prove more long-lasting than expected as the surging U.S. economy faces widespread bottlenecks that have severely disrupted the global supply chain, a Federal Reserve official said on Thursday.

St. Louis Fed President James Bullard predicted that prices for most goods and services will continue to climb in 2021 and 2022 after companies were thrown off by the speed of the economic recovery from the pandemic and the wave of pent-up demand among consumers who are flush with cash.

 

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AC

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