High Inflation Is Our Top News for 2022

It’s not a surprise that high inflation came in on top of our 2022 year in review. It and the economy came in as the most important issue in last year’s midterm elections, according to various news organizations’ exit polls.

What high inflation basically does is shrink people’s incomes. Its impact is like a broad tax that affects everyone from rich to poor. To millions of Americans on a fixed budget, high inflation matters to a point that could lead to rationing of prescription drugs for many seniors or how much food to put on the table for families. It could force heads of households to take on a second or third job, which takes away time from loved ones and personal time to regenerate and recover from an already hard day at work.

In a dramatic interpretation, it’s fair to say that high inflation is an insidious monster that is difficult to control. When prices go up on one or two items, it creates a ripple effect that other businesses must pass on to their customers. And that cycle of price hikes goes full circle and repeats itself.

There are many explanations why inflation is so high. It’s linked to the pandemic, labor shortage, low supply to high demand, bottleneck supply chain. These are “temporary” reasons. Other economists more thoughtful in systemic, a longer view, historical approach to reasoning, attribute high inflation to the concentration of industry where there isn’t sufficient competition. Basically, that large monopolies of industries can set whatever price they want. There is strong evidence to support this theory given that many big corporations are having record-breaking profits during this period of high inflation.

Then you have others who attribute Russia’s invasion to Ukraine (HFC’S number four top news of 2022) causing oil (by extension gasoline) prices to soar, as well as wheat and other products the two countries export heavily to the global market. The war is causing a supply shortage around the world.

All of these explanations are probably correct to some degree. Others are perhaps more valid and influential. The fact is inflation has been outpacing income for years prior to the COVID-19 pandemic and starting in late 2021 it just careened to limits that caused an uproar among a vast majority of Americans.

In 2022, high inflation – increasing cost of food, utilities, gas, rent, just about anything from milk and eggs to fertilizer – was everyone’s rant of the day. This has been the big topic we’d all hear about and participate in.

The fact that many felt the need to talk about it so frequently meant that stress levels are high, and people need to vent.

The other financial crisis waiting in the wings for 2023
The Federal Reserve’s response to tame inflation is to do what they’ve always done, raise interest rates. That is intended to slow the market down. Basically, to slow down demand which will bring about a closer equilibrium to supply.

But raising interest rates is harmful which is why the Federal Reserve is very conservative about raising it. Why? Because it could slow down business too much where businesses will begin to make minimum profit, just break even, or lose money. That, in turn, forces businesses to cut down on expenses.

Where do they look to first? Cutting back on staff, letting employees go. Unemployment becomes widespread, and we go into what economists are predicting for 2023, which is a recession. Then suddenly, Americans find themselves in yet another financial crisis they must wait out, as we’ve done in the last recession which was during the pandemic. There are experts who say raising interest rates will not tame inflation, at least not in this specific round of inflation that is more centered around basic goods and energy. Raising interest rates will directly slow down some industries like real estate which has basically come to a near full stop after the first quarter of 2022 in some communities. But raising interest rates will hardly affect the cost of basic goods and energy. The fact that groceries are still high and keep rising incrementally shows there is some evidence to back up this theory.

It’s very complex and frustrating to many Americans who find themselves on the short end of the stick and not in control to affect change, which is why inflation is exactly like an insidious monster that can’t be controlled.

Politicizing inflation failed
We see in the last midterm election (HFC’S number three top news for 2022) that Republicans’ attempt to politicize high inflation and blame the Biden administration and Democrats for it did not work.

It’s hardly believable if Republicans offered no alternative or plan to combat inflation themselves. It’s common knowledge that the hands off, let the market do its thing approach, or the correct economic term laisse-faire, does not work.

Most Republicans being real and truthful know laisse-faire doesn’t work. Only Libertarians seem to believe in it because they don’t want government’s hands in just about anything – the ultimate form of political Darwinism, caveman politics.

Democrats also are culpable in that they simply haven’t been able to do enough. But out of all the political parties, Democrats are right in that there must be a hands-on approach to fix the multi-pronged problems stated above as reasons for high inflation.

To do nothing is immoral
To do nothing about high inflation is gross negligence, even immoral as more Americans keep falling into poverty and into ALICE.

If we are to be serious about alleviating the constant pressures of financial hardship – by either inflation or recession – that Americans have been feeling and breaking their backs over, there must at minimum be an agreement on compassion and a political will to make life better for as many people as possible.

We need to bring morality into politics. This is the start and a lesson we should have learned decades ago.