Well, well, well.... How is that transitory inflation thing working out? https://www.wsj.com/articles/with-inflation-not-letting-up-shoppers-cut-back-on-staples-11649064601 With Inflation Not Letting Up, Shoppers Cut Back on Staples Consumers are buying detergent, diapers in smaller quantities and switching to store brands; ‘It doesn’t smell as nice’
The cure for high prices is high prices. Just to orientate this whole conversation back to something useful. It is not our M1 money supply, or corporate greed (look at margins not gross profit), it is a demand imbalance that is lingering and supply disruptions. Now if it were the US M1 supply or corporate greed, or whatever else strawman argument y’all got how come inflation is widespread throughout the majority of the western market? It’s because demand remains higher for goods than services, historically, and supply disruptions still linger. And my point is if we start drawing down on M1 with higher rates too soon we are going to cause a recession. We need more policy to “weather the storm” than we need actual monetary correction because we are just going end up in a recession without even addressing inflationary effects. And to @wildchild post about consumers adapting and changing behavior, THAT IS GOOD! That is precisely what we need to correct inflation and exactly what is meant by “the cure for high prices is high prices.” Markets follow consumers - Econ 101.
WHY? It’s because demand remains higher for goods than services, historically, and supply disruptions still linger.
It started as a reaction to the pandemic and lockdowns. People buying more so it yourself and taking stay-cations, eating in gourmet was the new eating out. The question is has the pandemic caused a paradigm shift in consumer behavior. Meaning did people spruce up their backyard so much that they would rather stay home than go the outer banks or are people tired of cooking and looking to go back out for dinner regularly. I think we will return but there’s plenty of people still wearing masks and adverse to the former ways. I honestly don’t know. Also, going forward, looking at companies, we have to look at their supply chains, the “just in time model” while super efficient proves to be a huge liability for companies. Auto makers and microchips will be a case study for Econ and finance students going forward.
Addressing your 1st paragraph, I think you need to go a little deeper. We paid millions of people to stay home and not produce any goods or services. That's why "this time is different" or more accurately, "that's why this time might very well be just like the late '70's and early '80's" Spiraling wages/stimulus leading to spiraling prices. I graduated HS in '72 so I saw it first hand. Since that time inflation has always been containable because we never saw wages get ahead of production. But that's what we have right now.
The velocity of money is key. When this moves up, I will change my position on inflation and say this is what Milton Friedman warned about, we need aggressive fed action. If it stays this way we should weather it. Look at Europe, how can US inflation be fixed with Fed monetary policy when it’s a global problem? https://www.statista.com/statistics/685943/cpi-inflation-rate-europe/
If inflation was only a problem in The US Biden could rightly be blamed,but its a worldwide problem.I'm not voting for Biden again but the economy and foreign policy aren't the reasons why.Hes doing ok there imo.