From Neil Irwin – NY Times – Is It Time to Panic About Inflation? Ask These 5 Questions First.
Neil Irwin – senior economics correspondent for The New York Times suggests asking these 5 questions if you are panicked about inflation.
Irwin aptly points out -“But inflation isn’t so scary if you focus on the precise mechanics by which the value of a dollar changes over time — and how it might affect you.”
Here are the five “essential” questions.
1. Is this a change in relative prices, or a change in overall prices?
Yes, just like Airbnb rentals – prices can fluctuate based on demand and are just the normal happenings of microeconomics).
2. Are the prices of items becoming more expensive likely to rise further, stay the same, or go down?
As Neil Irwin points out – not all price changes have equal meaning for inflation).
3. Are wages also rising?
As long as wages go up, inflation does not have as big an impact – that's if wages go up.
4. Is inflation so high and erratic that it is hard to plan ahead?
The US historically has not experienced erratic inflation with massive swings from one year to the next.
5. Is this really inflation at all, or is it a shift in the price of investments like stocks and bonds?
As Irwin points out – “And while there is plenty to worry about in terms of bubbly signs in financial markets — and what it would mean if they corrected downward, as major cryptocurrencies did on Wednesday — that doesn’t mean they are making ordinary consumers worse off. You can’t eat Bitcoin; you can’t clothe yourself in shares of GameStop.
Sometimes asset prices rise while consumer prices stand still, as in much of the 2010s. Sometimes consumer prices soar while financial assets languish, as in much of the 1970s. Other times, they move together.”
Read Neil Irwin's article at this link.
Photo credit: Photo by Rūdolfs Klintsons from Pexels