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Common Dreams - November 26, 2021

Inflation has been a bugaboo of right-wingers and even the political center since the 1970s. So it’s not surprising that with consumer prices rising, the national discourse has suddenly shifted from yesterday’s news to looming hyperinflation and fiscal ruin. But in order to understand what’s really going on, you need to understand what inflation is, what it isn’t, and where we actually are.

Starting in the 1980s, American politicians (from both parties, but driven by Reaganite Republicanism) have governed under the assumption that the peak annual inflation we had then was a product of too much government spending. Inflation peaked at about 14% annually in 1980, but the “great inflation” is often considered the period between 1965 and 1982, and it also includes such “externalities” as the Vietnam War, President Nixon taking the U.S. off the gold standard, the political crisis surrounding Watergate and Nixon’s resignation, and the massive oil shocks of 1973 and 1979 (both stemming primarily from instability in the Middle East).

Despite all those complicating factors, the conventional wisdom blamed President Carter for failing to stem rising prices, especially of gasoline, ushering the era of inflation-phobia.

So are we currently on the cusp of runaway inflation or not?

October’s 6.2% inflation rate, while higher than it has been recently, doesn’t measure up to our last inflationary crisis—at least not yet. While some pundits are wringing their hands about looming hyperinflation, their concerns are, shall we say, full of hot air. Hyperinflation is defined as inflation of at least 50% per month—the kind of crises afflicting 1920s Germany, 1940s Hungary, and 2000s Zimbabwe that coincide with a broader economic collapse. Those governments printed money to keep up with expenses, but with those nations’ domestic economies in ruins, the money had nothing to buy, causing prices to skyrocket in a vicious cycle driven by too much demand for too little supply.

The U.S. is experiencing none of those conditions, and, indeed, the economy has been buoyed in the 21st century by emerging as the world’s largest oil producer and as a net exporter of petroleum. The gross domestic product, as imperfect a measure of the whole economy as it is, has been growing since mid-2020, and the Federal Reserve has not taken any action in 2021 so far that demonstrates concern over inflation.

Even as oil production becomes increasingly unsustainable in the face of accelerating climate change and the rising costs of extraction, the U.S. dollar is still the top reserve currency in the world, unlikely to be supplanted by the euro, yuan, or Bitcoin. Even Donald Trump’s reign of chaos couldn’t dislodge the dollar from its perch atop the global financial system, or sidetrack the U.S. stock market. Job growth in 2021 has been generally good (revised statistics keep pushing the job numbers higher), and Goldman Sachs is now predicting that recovery from the pandemic will lead to a 50-year-low unemployment rate—3.5%—by the end of 2022. ...
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