The US and Europe are beginning to suffer from Corona’s new side effect: inflation. In the US, price increases have reached 6.2%, in Germany they are already at 4.5%, and there is a general atmosphere of uncertainty. Why does inflation raise its head, what are the dangers that are feared, and who still benefits from it? Global overview

On Monday afternoon, President Joe Biden stood in the Rose Garden at the White House, celebrating with a signing ceremony one of the president’s greatest achievements in decades: the new Infrastructure Law, which will result in a trillion-dollar investment in U.S. course infrastructure. In the 1950s, the federal government did not invest such sums in infrastructure, and Biden had reason to be proud.

The ceremony, on an autumn sunny day, has been a rather rare moment of light for Biden in recent months. Although in his first year at the White House he oversaw the fastest comeback in history from an economic recession, rising average wages in levels not seen for decades, and a stock market booming – support for him in polls is very low and Americans do not seem impressed by his achievements. The holidays are here right away, they go to the grocery store and pay a lot more for basic necessities, and go refuel and feel the pain in the wallet. No one really cares that this is a global problem, stemming from supply chain problems due to the corona crisis that refuses to end. At the end of the day, what matters to an American who is not interested in politics and does not follow the passage of one law or another, is how much milk costs him. And milk is now expensive.

In October, US inflation peaked at three decades, leading to price increases across the product range, from basic commodities to cars. -5%, and the index recorded the fastest rate of increase in 12 months since 1990.

The absurdity is that the American economy is in good shape, consumers are eager to buy products, and suddenly the economy has no ability to meet demand. Senior economist Laura Rosner-Warburton told the Wall Street Journal that she expects half a year of unusually high price increases. “I think we are moving to a new stage where inflation will expand,” Rosner-Warburton said.
Among the causes of inflation in recent months – the opening of trade and economic activity after vaccines became available and a large part of the restrictions were removed. Thus, fuel prices soared in October by almost 50% compared to the same month a year ago. Grocery products climbed 5.4%. Pork prices rose by 14.1% compared to last year – the largest increase since 1990.

New car prices soared 9.8 percent in October, the biggest increase since 1975, and furniture and bedding prices have jumped the highest since 1951. Tire and sports equipment prices have risen the fastest since the early 1980s. Restaurant prices have risen 5.3% – the sharpest since 1982. The rises were felt most strongly in countries in the southern United States, where the economy opened very early, but where the corona delta strain also hit hardest.

Another point affecting inflation is the shortage of available workers, as Americans continue to leave jobs and refuse to return to work in pre-Corona conditions. The shortage causes higher wages and adds to the motivation of companies to raise prices to offset costs.

The White House acknowledged this week that inflation is a real problem. Biden’s economic adviser, Brian Dis, appeared on all political programs on Sunday and said, among other things: “There is no doubt that inflation is high right now. “When the president took office, we faced an overall economic crisis, and now unemployment is very low, wages are rising and the economy is in good shape.”

Dis, as well as Treasury Secretary Janet Yellen, argued that the infrastructure law Biden signed this week, and another investment plan the Democrats hope to pass in the coming weeks, will ease the pressure and open the bottleneck. If that does not happen fast enough for next year’s Thanksgiving to be significantly cheaper than it will be next week, Biden will say goodbye to the Democratic majority in Congress.

By Editor

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