The dreaded “I” word has been cursed and debated – but mostly cursed – for a couple of years now. Inflation is a painful partner in life, it seems, even though it’s one we’d love to kick to the curb. It’s not as bad now as it was a year ago, but it’s still bad enough. Didn’t some “experts” say inflation was supposed to go away soon? (Why yes, yes they did.) So why is inflation hanging around like a bad canker sore, even years later?
Honestly, it depends on who you ask. We’ll give you both sides and let you decide for yourself.
Here are Five Fast Facts on what’s causing inflation:
- 💡 A Refresher - Remember that inflation is the rise in prices of goods or services over time. If you buy the same loaf of bread now that you did a year ago but it costs 10% more now, that’s 10% inflation. You can buy less with the same amount of money. For example, the cost of an omelet is up 49% over the past year. But at least it’s still tasty!
- 📈📉 The History - The government tries to keep inflation around 2% per year, and they were remarkably successful at it for a couple decades starting around 2000. But, in 2021 it exploded and was over 9% by mid-2022! It is now slowly coming back down, and seems to be holding steady around 5-6%. Here’s an idea: How about if the higher inflation gets, the less we pay in taxes? Just sayin’...
- 🏠🍲🚙 Primary Causes - The biggest causes of inflation right now are goods like housing, food, and energy, all of which are over 8% and obviously impact everyone on a daily basis. Services are becoming a big driver, too, because they have to keep up with the cost of goods. Keeping up with the Joneses is clearly off the table entirely.
- 📣 Donkeys Say - The political left will point to the Ukraine/Russia war as a cause for the spike in energy prices, and that weak consumer confidence is stalling out the post-COVID recovery. Isn’t it always the Russians?
- 🔊 Elephants Say - The political right says inflation is the result of reckless government spending – the national debt has gone from $9 trillion to over $30 trillion in the last 15 years – and terrible decision-making on energy policy. To be fair, we all make terrible decisions sometimes…but yours and mine don’t usually cost billions or trillions of someone else’s dollars!
🔥Bottom line: No matter who you think is right, the reality is that our Paychecks have been taken out behind the woodshed and beaten mercilessly. At this point there is no easy or fast answer, so we’re likely in for some pain for a while. If you don’t have a financial plan in place for tough times, it would be wise to get one. And go buy some medicine for that canker sore…if you can afford it.
What do you think should be done about inflation?
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