Are we worried about inflation yet?
While some politicians and cable talk-show hosts tell us we should be both worried and angry, the inflation we are seeing this year has been as unusual as it’s been disruptive.
For example, one doesn’t usually associate near-record-low interest rates with inflation.
In the early 1980s, the average interest rate on a 30-year mortgage hit a record 18.6 percent. Today the average rate is just above 3 percent for a 30-year fixed-rate home loan, and homeowners are saving boatloads of money by refinancing.
But have you seen the price of used cars — or rental cars? For people who need to buy or rent a car this year inflation is very real, even if it is temporary and due to supply chain issues.
Broadly, consumer prices have been rising. Just look at the Social Security cost-of-living adjustment coming in January, which is based on consumer prices. The 5.9 percent increase in benefits will be the largest in 39 years.
Now, 5.9 percent is an important number. What that tells people is that if their wages aren’t rising by at least that much, then their wages will buy less than before.
And of course, when companies and governments raise pay to keep up with inflation, that money has to come from somewhere. Just look at the “COVID surcharge” some Charleston area restaurants have added to bills, to make up for the higher pay needed to attract employees.
On a personal and family level, inflation can be very situational.
People working from home and no longer commuting are less sensitive to gasoline prices, which have been on the rise. Those who rarely dine out may not worry about COVID surcharges, but everyone buys groceries.
What’s been playing out is a strange combination of actual price inflation, wage inflation, supply chain issues that should be temporary and very low interest rates all at once.
Historically, the inflation that’s been keeping the middle class from getting ahead ever since the 1970s has come in the form of soaring costs for health care, housing and education, combined with meager wage gains.
That hasn’t really changed. The cost of health care is certainly more significant than the price of gas, but consumers are more aware of suddenly higher prices at the pump, the rental car counter, the grocery store or the restaurant checkout.
This year’s rise in gas prices seems more dramatic because in 2020, gas prices were the lowest they had been since 2016 according to the U.S. Energy Information Administration. Prices are lower today than in most of 2011 through 2015, but knowing that doesn’t make fuel less expensive.
What does, is …….