In case you hadn't guessed by now, I'm an economics junkie. Schooled in the discipline of economics, I never really "let it go" when I found other interests in which to pursue for a career.
In that vein, then, you'll find me talking about the economy and monetary and fiscal policy a little more than "those other Personal Finance" bloggers.
I wanted to draw your attention to something that will no doubt be in the news for the next couple of years: Inflation.
Inflation is the general rise in prices. If prices rise by 5% this year over last, the rate of inflation is 5%. We're pretty lucky here in the United States. I just read that Venezuela's inflation rate is north of 30%. But at least it's not as bad as Brazil's nearly 1,000 percent inflation of the late 80s.
Inflation is a drag on the economy. It means that the paycheck you earn doesn't go as far this year as it did last year. Gas, food, energy, and shelter (look at rents) are all more expensive this year than last year.
What drives it all? Some say it's a monetary phenomenon. The Fed is offering "easy money" -- in short, the Fed has created too much money too fast.
Some would say it's input costs: The manufacture of a tire consists of many inputs (rubber, energy, overhead, advertising, transport from factory to sales floor, etc.) and many, if not all, of these costs have risen.
In short, inflation can be caused by a number of things. It doesn't get really hairy until the inflation rate rises above 5 or 6 percent. Prior to that, sure, it's a bother, but it's not like gasoline doubled in a year (it did) or the price of onions rose by 400% (it did), but those costs haven't fully been absorbed into the cost of finished goods (yet).
You can bet that the Fed will do all it can to keep inflation in check, even if it means causing a recession (or worsening it, as the case may be).
Take a look at the graphic I just placed near the bottom right-hand side of the page -- it shows the most current rate of inflation. Just one more way I'll be bringing you topical, up-to-the-minute news about the economy. If you enjoy this sort of thing, by all means, let me know. If you don't, please kindly disregard it (because I like it).
The graphic looks like this --
Thanks for stopping by.
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