Jim Jubak has published an important article about inflation. Jim, with support from The Great Wave by David Hackett Fischer, explains how the Federal Reserve Bank is ignoring long-term inflation while being concerned with shorter, cyclical events. There is historical precedence for the price inflation the world is currently going through.
Jim picks out some items about price waves from the book that could help explain our current economy:
* Price waves aren’t recognized until they have been around for a while.
* Increased population, therefore demand, strains food and fuel prices.
* Increased demand means less efficient resources will be used, increasing production costs.
* Increased money supply drives inflation. Think of credit cards and no-down-payment mortgages.
* Wealth’s advantage by demanding tax cuts and other incentives to stay ahead of inflation while the working class falls behind inflation.
* The rising pessimism in society is a common thread in certain stages of price waves.
* Economic changes that might have been less harmful during better times create a crisis as prices soar.
I would be interested in reading Fischer’s book to follow up and learn about the historical evidence for this evaluation of inflation and about historical patterns pertaining to our economy today.
Updated February 6, 2012 and originally published May 24, 2005. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.