Why is Inflation hard to kill?

“Die! Die! Why won’t you die ? … Why won’t you die?”

Creedy asking V, ‘V for Vendetta’

How does inflation affect our lives?  The steady increase in the cost of essentials like food, clothing, housing, and transportation. Almost everything has gotten more expensive compared to a few years ago. How did it happen?

In 1991, U.S. consumers spent 11.4% of their disposable personal income on food, according to data from the U.S. Agriculture Department. At the time, households were still dealing with steep food price increases following an inflationary period during the 1970s. More than three decades later, food spending has reattained that level, USDA data shows. In 2022, consumers spent 11.3% of their disposable income on food, according to the most recent USDA data available.

More expensive production cost leads to price increase

Why is the cost of producing goods rising? 

With ongoing geopolitical instability, conflicts among OPEC members, and production cuts. Oil prices are anticipated to remain high. Production costs for essential goods are on the rise, leading to increased living expenses. These price hikes contribute to inflation, force individuals to reduce spending and consume less.

Demand Decline 

The Supply Chain is changing. Why?

Countries and businesses are reevaluating their interests and restructuring their supply chains. Transitioning from a globalized to a more regionally-focused model. This shift is anticipated to disrupt the previous structure, impact costs and drive inflation.

Monetary and Fiscal Policy

Loose monetary and fiscal policies, such as lowering interest rates and issuing stimulus checks to households. Inject additional money into the economy, prompting increased spending.

Rising Wages

Workers may start to demand higher wages to keep up with rising prices and maintain their standard of living. Increased wages could lead to higher costs for businesses, which they may then pass on to consumers. Recent strikes across various industries, including the auto sector, Hollywood, and pharmacy. In addition, fast food chains like McDonald's and Starbucks are raising their prices to adapt to increasing minimum wages. 

Investors are facing a tough situation with increasing inflation reducing their purchasing power. This makes it essential for investments to provide returns that beat inflation. However, the current financial market is experiencing significant shifts in its fundamentals. The stock market is reaching all-time highs. Concerns about potential losses from treasury bonds if interest rates continue to rise alongside inflation. We're on a mission to find alternative solutions that not only beat inflation but ensure the safety of our investments.

“Inflation, why don’t you get out the nation,

Taxation, can’t help the situation”

Earnest Jackson & Sugar Daddy and the Gumbo Roux, ‘Inflation’

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