Notebook: Our shrinking dollar
EDITORIAL MUG: Larry Anderson
Hot on the heels of COVID was the inflation dragon with which we are still battling. Indeed, inflation is likely to remain in our wallets at least until next year when an approaching election may improve performance in casual Washington. We will see, but I suspect inflation will be tamed only when it benefits the most politically.
Inflation is something that is often felt more readily than understood even though the causes are few. One primary contributor is when there is more demand than supply concerning something important enough to impact the broad economy. A sudden short supply of oil, for instance, can trigger inflation because virtually everyone consumes it in a variety of capacities, even environmental activists pretending otherwise.
Heavy demand unmet quickly by production adjustment can drive up prices too fast. Typically that shortage doesn’t last long due to America’s economic adaptability, but lately inflation has begun to drag. Over two years is too long, and since gas prices are trending upward still, it is tough to anticipate inflation abatement. Also, we are adjusting mentally to higher prices for fuel. There is political purpose behind this fact.
The Biden administration hastily blamed the invasion of Ukraine for an oil vacuum that drove up gas prices and inflation. That seemed logical except a delighted Biden had already made it clear he intended to cut production and consumption of non-renewable energy. Oil fields were closed, leases ignored or deferred, and the message sent America would not remain energy independent as had been proven possible. These factors had an impact at the pump and on everything transported.
It is okay, I think, to call Biden’s position on energy hasty, pandering to the special interests that helped elect him, and defeatist for the nation. It is what it is.
Money supply can contribute to inflation too. Too much money in the economy sounds odd, but the fact is if too much comes in too fast it can narrow supply of many essential goods due to purchasing speeded up. Supply and prices are affected, especially if normal lines of delivery are snarled by politics.
You will recall the federal government flooded the economy with monetary support during COVID ostensibly to offset the disease’s impact on employment and savings. Those checks were welcome at the time, but the money supply increased too rapidly. Remember too much money in the system increases the ability to buy too fast which narrows supply. When too much dough pursues too few goods, inflation spikes.
How could the federal government not know this result could happen based on precedence.
A strained dollar encourages workers to expect higher pay and employers to pay it to attract and retain employees. It becomes a matter of keeping up, but not everyone in business can. Small, marginally profitable businesses have closed or cut back by the thousands in America due to COVID and the inflation aftermath. Many Americans have paid too high a price.
Other factors can contribute to the advent and persistence of inflation such as too much debt. The Biden/Congress plan now is to raise the debt even more. That doesn’t seem like much of a solution
The main means of combating inflation has been to raise interest rates. Now we have inflation at five per cent (two per cent is generally manageable) and high interest rates which make borrowing and expansion more challenging if not impossible. These factors make it tough to build a house but more likely folks will keep a car that needs replaced or skip a vacation. The economy dawdles like an old man at a crosswalk.
I believe decisions in Washington concerning inflation have been based far more on political expediency than sound economic decisions that could and should have curbed inflation by now. Instead we’re stuck with a shrinking dollar and an administration that has not made stopping destructive inflation as important as its so-called progressive agenda.
Larry W. Anderson is a retired educator.
