What's So Bad About Inflation?
When I was in college, I had to take a required course called Economics 101. What we did in this course was to spend 60 class hours learning how the economic system worked. And the way capitalism worked was based on two things: supply and demand.
Here’s what we learned. When there was more demand than supply, you had inflation. When there was more supply than demand, you had deflation. The trick was to keep a balance between the two. Now hold that thought.
Yesterday on my way to Thanksgiving dinner north of Boston, we took a detour and drove through Fort Devens, which was the largest East Coast military base during World War II. Now the base has a small, U.S. Army Reserve station, a Job Corps center and a hospital run by the Federal Bureau of Prisons.
There is also an industrial park with more than thirty large manufacturing plants, making everything from industrial glass and wire components, to specialized chemicals and hi-tech doodads of all sorts. The United States doesn’t manufacture consumer goods – that crap is made in places like Mexico and what used to be known as Taiwan. We make the stuff which countries need to move from being industrial to post-industrial nation-states.
Yesterday, every single one of these companies had Help Wanted signs on their front lawns – every, single one. And I’m willing to bet you that when somebody drives around Devens looking for a job, they’ll visit a bunch of prospective employers to see who is paying the highest wage.
Except I don’t think that anyone is actually showing up at Devens and looking for work because for the first time this economy is so strong that everyone has a job and the demand for goods and services has outstripped the supply of workers to meet the demand.
The chain of mini-marts around where I live is advertising for men or women who can deliver fuel from the wholesale depot to each retail store. Employment requirements are as follows: a commercial driver’s license (CDL), a clean record and a negative drug test. Note: a high school diploma is not on the list.
What’s the starting salary? For an area where you can rent a modern, two-bedroom apartment with off-street parking for $1,100 a month, this employer is paying $94,000 a year plus benefits – to start!
The local McDonald’s just reopened after doing a complete make-over of the store. They are hiring at $16 an hour and a $500 bonus when you sign up.
In other words, the high school sophomore who is flipping burgers at Mickey Dee’s for four hours every weekday after school and shows up either Saturday or Sunday to fool around for another shift is picking up a gross paycheck of $450 – a week! That’s $24,000 a year for a sixteen-year old kid.
I didn’t earn $24,000 a year as a college professor until I was thirty-two or thirty-three years old. Today’s so-called inflation doesn’t sound all that bad to me.
And meanwhile, the owner of this franchise tells me that he “can’t find any help.”
Back in February, NPR did a story in which they claimed that jobs were going unfilled because people didn’t want to work in face-to-face environments where they might catch the ‘Chinese flu.’ (I think, by the way, that Donald Trump’s ultimate legacy will be his description of Covid-19 using various racist tropes.)
If so many people are staying at home and consciously taking themselves out of the workforce, how come the unemployment rate in 38 of the 50 states is under 6? How come in a manufacturing state like Minnesota it’s 3.5, or in Wisconsin it’s 3.1?
Obviously, the rise in gasoline prices at the pump also pushes inflation throughout the entire economy because the crap we buy at Walmart or Home Depot is delivered to those stores by truck. So, if the trucker pays more for his fuel the consumer will also take it, price-wise, in the ass.
Meanwhile, I don’t notice the parking lot in front of Walmart somehow bereft of cars. Know what Walmart’s sales were in FY2021? Try their highest since 2018 – ready? - $559.2 billion, which happens to be higher than the gross domestic product of Sweden, as well as the GDP of 168 of the 190 countries which occupy some landed space on our globe.
The real problem right now is not the so-called inflation, it’s not that so many people can’t find work. The real problem is that the current Administration did a much better job convincing voters why they needed to make a change in D.C., rather than explaining to voters now why that change has worked.
For that matter, Donald Trump might still be sitting in the Oval Office rather than in Mar-A-Lago if he had come up with a more convincing spiel after he was inaugurated in 2017.
We live in an election cycle which goes on all the time. But getting elected isn’t the same thing as being in charge.
If Joe doesn’t come up with a more effective message for governing, as opposed to the messaging he used last year to grab the brass ring, one-term Presidencies may become not the exception, but the rule.