Issues Discussed in the Articles
The American economy has been lagging since the COVID-19 pandemic hit the world. After forty years of controlled inflation rates, the US CPI inflation rate skyrocketed to 8.2% in September 2022 (Ball, Leigh, & Mishra, 2022). The inflation rate steadily increased until 2023, when the rate began staggering. The high inflation rates have adversely impacted the lives of American citizens and residents in diverse ways. High inflation has eroded the citizen’s purchasing power, skyrocketed the cost of living, adversely affected investments, and lowered consumer confidence. An eroded economy continues to evoke fear among citizens seeking economic security and stability.
Ball, L., Leigh, D., & Mishra, P. (2022). Understanding U.S. Inflation During the COVID Era. International Monetary Fund. Retrieved from file:///C:/Users/User/Downloads/wpiea2022208-print-pdf.pdf
The authors evaluated the drastic rise in inflation rates in the United States since the inception of the COVID-19 pandemic. The3 authors explore some factors that have contributed to and sustained the high inflation rates in the United States. According to the article, the covid-19 pandemic was a central contributing factor to the rising CPI inflation. The pandemic disrupted the global supply chain, provoked a change in government policies, and interfered with consumer behaviour. Underlying structural factors have also significantly driven the inflation rates to the top of the curve. The rigid labour market has paved the way for core inflation to rise. Using the inflation behaviour expectations and Beveridge curve, the authors project that a decline in inflation will require the labour market to loosen slightly. This loosening can only be achieved when the unemployment rate goes slightly higher. The study comprehensively evaluates the role of policies in controlling or raising the
Presented View Point
Unlike consumer expectations that an increase in employment rate lowers inflation, the article holds that the unemployment rates in the United States will need to increase drastically, followed by a recession for inflation rates to drop. The inverse relationship emerging from these two variables is explained by the fact that during high unemployment periods, consumer purchasing power decreases, reducing the pressure on prices.
Synthesis
This article does not directly outline the impact of inflation on Americans’ lives. However, the factors contributing to and sustaining the high inflation rates, such as high energy prices, increase production costs resulting in an upward shift in the prices of goods and services. Consumers can hardly cope with the high prices. The article also points to the possible increase in employment rates witnessed in the last three years. A decline in the unemployment t rate is linked to the rise in the consumer purchasing index. However, Americans hardly feel the benefits of this increase in employment rates as most of their earnings are spent on essential goods, which are comparatively costly in an inflated economy.
Future use
Ball et al. precisely deconstruct the relationship between inflation and wages. The authors establish a direct connection between wages and inflation. A tight labour market is achieved when inflation increases because the price of labour increases. Despite wage inflation, consumers can hardly sustain the high cost of living. This article will be used to explain why consumers still strain to accommodate the rising cost of living despite an increase in wages.
Reflection
A concept that struck me in this article is the inverse relationship it establishes between unemployment and inflation. The two cannot fit in a perfect relationship where high employment rates result in disinflation. Either way, Americans have to deal with some level of adversity that significantly impacts their quality of life.
Hodge, A. (2022). The U.S. Economy’s Inflation Challenge. Retrieved from https://www.imf.org/en/News/Articles/2022/07/11/CF-US-Economy-Inflation-Challenge
The article asserts that even though the United States economy has bounced back from the pandemic, the inflation rate has steadily risen, contrary to popular expectations. The author connects the rising inflation to factors such as labour shortage, high demand for goods and services, and supply chain disruption. Prolonged inflation feeds back into prices and wages. As the labour market tightens, companies must increase the prices of goods and services to accommodate wage inflation. The author notes that policy reforms have significantly sustained the high inflation rates but could help achieve deflation in the long run. The author calls for an international corporation to solve global economic problems.
Opposite Perspective
The article’s intriguing point is the impact of government policies on inflation. The author notes that the federal government responded to the rising inflation by raising its policy rates. The rising policy rates increased borrowing costs. The policies are expected to lower consumer spending and ease the supply chain strain. A rise in mortgage rates is expected to reduce the cost of housing in the long run. A decline in demand will eventually increase unemployment rates lowering the cost of wages.
Synthesis
The article forecasts a strenuous economic future for the United States due to the ongoing war between Ukraine and Russia. In line with Ball et al. (2022), Hodge (2022) notes that extended inflation is expected to increase inflation expectations. The significance of inflation expectations on inflation behaviour emerges as an important aspect in this case. This point shows that more Americans, consumers, investors, and businesses expect inflation to increase, thwarting efforts to achieve deflation. Inflation expectations positively affect inflation rates in that businesses raise prices of goods and services by a similar percentage to inflation expectations. The article also presents critical points on the role of policies in lowering inflation. The policies approach this issue by addressing mortgages. Increasing mortgage rates is expected to strain consumer spending on housing, putting pressure on mortgage prices to drop. A decline in demand is also expected to occur over time due to a decrease in consumer purchasing power, thus lowering the cost of wages. These insights significantly tie to the insights explored by Ball et al. (2022).
Future Use
The article explores some of the negative consequences of inflation on the U.S. economy. The author also discusses policy options that could change the inflation path and restore the country’s economy. This article provides great insights that will be used to explore how inflation affects different sectors in the country and consumers resp[onse to these impacts.
Reflection
The backdrop of this article is that policies determine the health of the U.S. economy. The report claims that policies could expand the labour force size, eventually lowering inflation. This point contradicts points by Ball et al. (2022) and Samuels (2021). The latter authors assert that for inflation to drop, the labour market has to ease, allowing for unemployment to go up. I find this quite confusing.
Oner, C. (n.d). Inflation: Prices on the Rise. Retrieved from file:///C:/Users/User/Downloads/oner-inflation.pdf
The article discusses the recent increase in inflation in various countries and its impact on consumers. The article explains important aspects of inflation, such as core and highlights factors such as supply chain disruption, increased demand, and rising energy prices as the cause of the rising inflation. The author addresses both the good and bad sides of inflation. The good aspect of inflation is that a borrower initially paying 5% interest on a mortgage is likely to experience a decline in the interest rates due to the low demand for houses when inflation increases. A downside of inflation is that it erodes consumer purchasing power, thus lowering consumers’ standards of living.
Different View Point
Oner’s article is the only piece among the four articles that looks into inflation in both dimensions. The article highlights some of the advantages consumers can derive from this period of inflation peak. For instance, consumers can leverage this period to purchase houses as their prices are comparatively lower due to high mortgage rates.
Synthesis
The article attributes inflation to increased demand, supply chain disruptions, and rising energy prices. However, the author notes that monetary policy is critical in sustaining or reducing the inflation rate. This claim taps into Hodge’s (2022) assertion federal policies can lower the rising inflation rates by increasing mortgage rates and incentivizing innovation. A state does not need robust growth in money supply as this growth erodes the value of a currency. The outcome of such change is possible inflation that further erodes consumer purchasing power by increasing the prices of goods and services.
Future use
This article explains how inflation can positively impact citizens’ lives. For instance, policies responding to inflation might increase mortgage rates, putting pressure on prices to skyrocket in the short run. However, since the purchasing power is comparatively low, housing prices eventually fall. This article will be used to explain how consumers can leverage inflation to better their lives in the future.
Reflection
A concept that struck me is the benefits consumers can derive from high inflation. As a consumer adversely impacted by inflation, I have learned to make good investments during inflation for a better economic future.
Samuels, A. (2021). Why Is Everything More Expensive Right Now? Let This Stuffed Giraffe Explain. Time. Retrieved from https://time.com/6088033/why-inflation-is-rising/
Summary
The article explores some of the reasons behind the rising inflation rates and their impacts on consumers. The author uses a stuffed giraffe to explain how inflation changes. Like a stuffed giraffe that gradually grows, the prices of goods and services have steadily been increasing and significantly running against consumers’ purchasing power. In line with Ball et al.’s (2022) claim, the author acknowledges the Covid-19 pandemic as a significant cause of the pandemic. The pandemic disrupted the supply chain, breaking goods’ movement across and between countries. The increasing demand for goods has put pressure on the prices of goods and services, which are rampantly increasing.
Presented View Point
The article pays close attention to the supply chain and uses this scenario to explain why goods that cost less in 2019 cost almost two times more two years later. Using Amazon as an example, the article notes that companies straining to get goods through the supply chain bottlenecks to consumers must also make a profit, hence, charging more for the goods to accumulate the profits.
Synthesis
Samuels’ article shares great insights on inflation with Ball et al.’s insights. The two groups of authors dig deep into the supply chain, exploring it as a central cause of the rising prices of goods and services nationwide. Samuels notes that the fragile and incomplete supply chain caused significant bottlenecks in the supply system that no company can singlehandedly clear. Samuels also acknowledges the role of the tight labour market in sustaining the rising cost of goods. The cost of labour significantly increased, demanding companies to charge more for a single interest for them to accommodate the high labour while equally making profits from these goods and services. Unlike Ball e al., Samuels’ analysis does not forecast the future of inflation, leaving the audience anticipating an insight that promises them a better future.
Future Use
This article provides great insights into the relationship between supply and demand. The author deconstructs the connection between supply chain bottlenecks and the rising prices of goods and services and how this relationship connects to the high cost of living. This article will be used for future research to explain how inflation impacts consumer life by looking into housing, grocery shopping, and travel.
Reflection
What struck me in the article is the uncertainty on the long-term impact on the consumer and economy. COVID-19 is already down, but the prices of goods keep fluctuating, creating an image of an uncertain future.
References
Ball, L., Leigh, D., & Mishra, P. (2022). Understanding U.S. Inflation During the COVID Era. International Monetary Fund. Retrieved from file:///C:/Users/User/Downloads/wpiea2022208-print-pdf.pdf
Hodge, A. (2022). The U.S. Economy’s Inflation Challenge. Retrieved from https://www.imf.org/en/News/Articles/2022/07/11/CF-US-Economy-Inflation-Challenge
Oner, C. (n.d). Inflation: Prices on the Rise. Retrieved from file:///C:/Users/User/Downloads/oner-inflation.pdf
Samuels, A. (2021). Why Is Everything More Expensive Right Now? Let This Stuffed Giraffe Explain. Time. Retrieved from https://time.com/6088033/why-inflation-is-rising/
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