But, I suppose, better late than never. The point of the piece is that inflation isn't solely the product of money-grubbing, overpaid serfs, i.e. wage push. Finally, he discusses the other forms, and in particular, inflation in limited sectors caused by immediate term shortage. IOW, after more than a year of Covid contraction, and a vewy, vewy rapid vaccination regime (well, in the consumer sourcing Blue States, at least), production needs some time to ramp back up. And given that a significant proportion of consumer goods, even those with American brand names, come from Asia, supply won't re-appear with a snap of the fingers.
So, he starts with some pertinent questions:
Is this a change in relative prices, or a change in overall prices? Are the prices of items becoming more expensive likely to rise further, stay the same, or go down? Are wages also rising? Is inflation so high and erratic that it is hard to plan ahead? And is this really inflation at all, or is it a shift in the price of investments like stocks and bonds?Regular reader may see one question with which I've always disagreed with Mr. Irwin: the soaring of Mr. Market's prices since the Great Recession is still just inflation; lots of analysts have been saying for most of those years that P/E ratios are whacky. One might also argue, I have, that the Fed's QE/bond buying effort to keep nominal interest rates very low also drives up stock prices. Vis-a-vis Damn Gimmint zero-risk instruments, aka the opportunity cost, more moolah flows to stocks, pushing up prices, and lowering the interest analog, the inverse of P/E.
And, then the crux of the current matter
The core challenge of an economy emerging from a pandemic is that numerous industries are going through major shocks in demand and supply simultaneously. That means more big swings in relative price than usual.It's going to take some time for those widgets to get here by boat from Asia. Just that simple.
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