Currently, there is a continuing rise in the U.S. general price level. This increase is attributed to the increase in the volume of money and credit relative to available goods and services. Inflation is upon us. Money value decreases while prices increase. COVID-19 is the obvious cause of this effect. The U.S. GDP is at the epicenter.
We, as citizens of the U.S., have turned our attention towards how much we're paying for the totality of the things we consume. The recent intensification and inflation may be on a short time schedule. Some consumers are cautiously witnessing the slowdown in the U.S. GDP. Others have been awaiting its arrival. Controlled inflation is a healthy byproduct of a growing economy. It had been stagnant for so long that economists were furrowing their eyebrows.
"As with the April report, the May CPI inflation reporte from the Bureau of Labor Statistics (BLS) highlighted that prices rose across the board by a lot. Overall, prices in May climbed 5% year over year, the biggest such gain in the headline CPI data since August 2008. Even when you strip out volatile food and energy prices—so-called core CPI inflation—prices rose by 3.8% year over year in May (forbes.com)."
Investors need to know that inflation will remain enlarged. The stock market will make a noticeable shift. A selloff, approximately 15%, will take place. Investors, get on your toes.
"Persistently high inflation will move the 10-year Treasury yield to 2% and get the Federal Reserve to start tapering its stimulus by the end of the year. Both will rattle the stock market(MarketWatch.com)."
As the bull market proceeds, stocks will go higher. Companies are positioning for strong economic growth. Earnings are higher, valuations are lower, and investors feel more comfortable.
Famous Thoughts on Inflation:
"Inflation is taxation without legislation."
-Milton Friedman,
1912 through 2006, (A Theory of the Consumption Function)- author, famous for his point of view, Keynesian view. Individuals and households adjust their expenditures on consumption to reflect their current income. He stated, people’s annual consumption is a function of their permanent income.
"The lesson is clear. Inflation devalues us all."
-Margaret Thatcher,
1925 through 2013, accelerated the evolution of the British economy from statism to liberalism.
'...the deficit levels...are unsustainable. At a certain point, other countries stop buying debt, we have to raise interest rates, and it will create economic inflation."
-Barack Obama,
1961, U.S. President 2009 through 2017, utilized new policies, diplomacy, and rhetoric in order to reverse a sharp decline in world opinion toward this country.
In my opinion, our Labor Force should experience a severe wage increase. Our struggling workers deserve to be able to pay bills and live a comfortable life.
Possible results with wage increases could result in a market pointed towards inflation. Wage push inflation might result. Wage push inflation is an overall rise in the cost of goods that results from a rise in wages (investopedia.com).
We're already going through inflation. We might as well pay a higher wage to everyone.
To maintain corporate profits after an increase in wages, employers must increase the prices they charge for the goods and services they provide. The federal and state governments have the power to increase the minimum wage. With a higher money supply, consumers have more spending power, so the demand for goods increases. An increase in demand for goods then increases the price of goods in the broader market.
Inflation can be stopped. Governments can use wage and price controls to fight inflation, but that can cause recession and job losses. Governments can also employ a contractionary monetary policy to fight inflation by reducing the money supply within an economy via decreased bond prices and increased interest rates.
The government is already acting.
"Amid a booming economy and rising inflation, the Federal Reserve this week could signal that it's likely to move up the timetable for withdrawing the extraordinary stimulus measures it has enacted during the COVID-19 pandemic (USAtoday.com)."
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