US inflation arrives for Thanksgiving dinner
The inflation that is reshaping both the US economy and US politics is coming home for the holidays.
The aisles of the Hannaford supermarket here are full of shoppers, but as they fill their grocery baskets for the country’s favorite vacation, they are also filled with fear. Thanksgiving turkey costs US $ 4.60 more than last year, cranberries increased by more than a quarter, sweet potatoes by more than a dime and peas by more than a dime, according to reports. grim figures compiled by the American Farm Bureau.
Thanksgiving here is a time when families gather around a table groaning with the bounty of the fall harvest. Indeed, since the end of the First World War, the hymn of this festival is the Dutch one. We come together. But this year, that family reunion could show signs of what may be the biggest generation gap in decades.
The seeds of this potential generation gap will not be racial integration or political alienation or even party polarization, but rather inflation. Public opinion data compiled by Pittsburgh-based CivicScience shows concern across generations – but that people aged 18 to 29 are twice as likely as those over 65 to say they are “not at all concerned” about inflation.
People over 65 were 20 or older when Jimmy Carter was inaugurated amid what economic historians have come to call the Great Inflation. They experienced the economic instability of inflation and its handmaid, social instability, which at that time aroused fear and distorted the commercial life of the country.
Over the two decades beginning in 1960, annual inflation in the United States fell from 1.4 percent to 13.3 percent. It undermined the authority of a government that seemed unable to stem inflation and make predictable the prices Americans pay for daily groceries, gas stations, and malls, as well as for large purchases such as automobiles and homes.
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A Quinnipiac University poll this month found that nearly seven in ten Americans said rising prices for items like food and gasoline caused them to change their spending habits, and CivicScience figures show Republicans are more concerned about inflation at more than double the Democrats’ rate. It’s no surprise then that the two main Democrats publicly expressing their fear of inflation are former Treasury Secretary Lawrence Summers, who turns 67 next week, and West Virginia Senator Joe Manchin, who has 74 years old.
They saw how, as Robert J. Samuelson wrote in a 2008 retrospective of the Great Inflation, “the rise and fall of inflation has had a dominant influence on the successes and failures of the economy. “, Adding:” Inflation and its fall have shaped, directly or indirectly, what Americans have about themselves and their society; how they voted and the nature of their politics; how businesses operated and treated their workers; and how the US economy was linked to the rest of the world.
A few pages later, Mr. Samuelson issued a warning that haunts today: “As memories of the Great Inflation fade – for many Americans they don’t even exist – they can get lost. The vagaries of inflation may seem less threatening, and only by experiencing them again will we be reminded of their pernicious power.
During the Great Inflation, banks, life insurance companies, pension funds, stocks, bonds, farmers, corporate balance sheets, small businesses and households were affected. Because people’s incomes have increased (but not enough to keep up with inflation), the phenomenon of “bracket drift” has drawn Americans to more punitive tax brackets – an outcome which, in a bizarre byproduct of inflation, has helped governments by providing more revenue.
At the same time, inflationary expectations, perhaps more dangerous than inflation itself, have caused other deleterious effects.
“If people believe inflation is here to stay,” financial analyst A. Gary Shilling wrote in 1983, “they will continue to use the strategies that have worked so well in the past: buy now, pay later; go into debt to accumulate tangible goods; buy collectibles and real estate at any cost, as prices can only rise; accept price increases from suppliers and demands for labor compensation, as these can easily be passed on in turn.
Public opinion scholars Seymour Martin Lipset and William Schneider wrote during the Great Inflation that “a high inflation rate seems to lower public expectations for the future in every way: for their own lives, for the country as a whole or for the economy. . “
This is why former President Gerald Ford urged Americans to wear “WIN buttons,” meaning “Whip Inflation Now,” one of the most laughable and unsuccessful efforts to contain inflation expectations. In a February 1980 interview with the editors, Mr. Carter, who had defeated Mr. Ford in part because of economic problems, said: “It would be misleading of me to say to any of you that there is a solution to this problem.
Inflation was a largely forgotten thing of the past – a historical curiosity, although hyperinflation after WWI in Germany and post WWII in Hungary was still widely studied – until about six months ago . And indeed, current inflation, which at an annual rate reached 6.2% last month as measured by the Consumer Price Index, may well be transitory, last a few quarters and largely due to supply chain disruptions – although the massive amounts of money Congress has pumped into the economy and the money created by the Federal Reserve could keep it going.
“There are some really bad things about high inflation,” said Christopher Ragan, an economist at McGill University. “The first is how it disrupts the economy and hurts growth. The second, and possibly the worst, is the pain that must be inflicted on real people to wrest inflation out of the system. “
The disinflation that attacks inflation is monetary tightening that drives up interest rates and creates a recession. This is why central banks are so vigilant in keeping inflation low. Once it hits 6% and stays there, the public is crying out loud to bring it down and it’s painful.
However, the current inflation news is not all bad. The price of Thanksgiving stuffing has dropped by half a dollar.
The opening line of the Dutch hymn begins with “We come together” and is immediately followed by “to ask for the blessing of the Lord”. Amid COVID-19 and inflation concerns, that’s what many American families are doing this week.
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