A huge caveat here: I am not an economic expert and I really, really, don’t know what I’m talking about here (even more so than usual). But it helps me to think through things to write them down and, perhaps, someone else can benefit from this (even if it’s to disagree).
I’m in no way trying to minimize the real impact of inflation, especially on poorer folks. (For middle and upper class folks, it really shouldn’t be a big deal unless you’re living paycheck to paycheck, in which case you’ve been living beyond your means. For the rest of us, it just means we are a little less rich. But I digress.)
But two thoughts, the first from this post from Ben Carlson which I suggest you read. I think with all the angst about inflation, people forget that we’ve faced a once-in-a-lifetime (hopefully) pandemic that has led to many disruptions, including supply chain disruptions, and because of the inability to spend on services we’ve spent more on “stuff”, which has led to much of this inflationary surge. (And, of course, now the invasion of Ukraine, which is tragic in and of itself, but has certainly contributed to supply chain issues and the cost of energy.)
I’m sure the fiscal stimulus has contributed to inflation, but it’s really hard to tell how much. And I think something else people have forgotten is that without the stimulus, we likely would’ve had persistent double-digit unemployment and a recession, possibly a depression. That would be way worse. (And, of course, we’ve finally seen some wage gains on the lower end.)
The second thought is keeping this in perspective. The Fed’s “goal” is 2% inflation and, coming out of the Great Recession, the concern was that we weren’t meeting that goal because inflation was too low. In fact, if you look at cumulative inflation from the Great Recession (2009) through 2020, it averaged 1.54%. Inflation picked up in 2021, so the average through 2021 was 1.78%. If you throw in an 8.5% for 2022 (which is obviously still unknown), it still only brings it to 2.24% (see spreadsheet). So I think you can make the case that at least some of this inflation is also making up for “underinflation” (to make up a word) from the previous decade.
Now, if inflation continues at the current pace for a long time, then none of that matters. That would definitely be very bad. But if inflation starts to subside over the next 18 months as I think is possible (and hope is true), then this is a temporary surge and readjustment. (I have no crystal ball, but my hope would be that by the end of this year inflation is below 6%, by this time next year it’s below 5%, and by this time in 2024 (two years from now) it’s somewhere between 2% and 4%, hopefully closer to 2%).
Again, this is in no way meant to minimize the real, negative impact on many folks, but just an attempt to perhaps remind us of the recent past and that, if you extend your timeline out just a bit, inflation maybe isn’t a crisis (at least not yet).