How Bad Will Inflation Get in 2022?
How bad is it going to be and for how long.
With this Off the Grid Newsletter I really want to talk about personal finance, minimalism and a ton of different topics. But for economics on a macro scale, it’s hard not to talk about rising inflation as we head into 2022.
The wonderful thing about central bank intervention of the extent we have seen in the last two years, is the sharpest inflation in decades.
Accounting for stagnant wages over the last generation, it means Americans are literally getting poorer and churning from the Middle class in increasing numbers in the 2020s.
How so? Well the price of things just got a lot more expensive, if you hadn’t noticed.
In some parts of the world food inflation was a lot higher than this!
The cost of clothes, groceries, furniture and other goods are rising in the year ahead. Supply chain issues will persist, rising wages suggests that inflation could be here for a long time, and nobody really knows how much longer.
A pandemic has caused a Great Resignation with a labor shortages and a lower labor participation rate. New variants of a pandemic has complicated the so-called economic recovery.
Between inflation and ongoing supply chain issues, prices are rising on consumer goods nearly across the board. It could lead to some poor economic outcomes for wealth inequality and rising problems for racial minorities, women and the bottom 40% of society. A lot of families that live paycheck to paycheck are in serious trouble in 2022.
Housing, food and clothing are major expenses for more families and household incomes. The cost of travel and used vehicles is a lot higher. The cost of living the same standard of life compared to even a few months ago, has shifted fundamentally.
The only thing that proved transitory about inflation in America in 2021 was the consensus that it would subside. In 2022 we now know the narrative that inflation would be “transitory” (think months) wasn’t so accurate, now we must wait it out for some years.
The Real-Estate Bubble
With a housing bubble rents will go up as well. For some, buying a house has been one of the pandemic’s greatest challenges, even as mortgage rates hit record lows. Unfortunately, 2022 could be another year of new highs as home prices continue to appreciate two-to three-times faster than a year ago
Other things that should be more expensive in 2022 include:
Heating
Gas
Clothing
Eating out
Hotels
Cars
Computer & Electronics
Furniture
Medical Care
So um gosh yeah, that’s a lot of things we as consumers need and care about. With so much more liquidity in the system (Fed buying bonds and printing money), the value of the American dollar isn’t quite what is used to be.
After a second consecutive year in which the word “unprecedented” rises in inflation did more than its fair share of narrative heavy lifting, economists are looking ahead to 2022 with a sense of wariness. It’s alarming for the average American consumer.
America, the expensive. That’s the new normal.
According to data from the National Association of Realtors, the median price for an existing home rose to just under $354,000 as of November (the most recent month for which data are available), an annual increase of around 14 percent.
Stagnant Wages Won’t Meet Inflation Costs for Average Americans in 2022
Going to the grocery store is going to start eating away at your budget very quickly. Food prices could spike wildly in some countries.
Rents are going to hurt as well. 2022 is likely to be another year of higher rents, with estimates in the 7 to 10 percent ballpark increase nationwide in 2022. But are wages really going up in the field in which you work?
Welcome to the new normal, the Biden Administration’s era of what we should expect for 2022. Consumer prices are now rising by nearly 7% compared with a year earlier, the fastest pace since 1982.
Higher inflation in the near term is likely to get the Federal Reserve to start raising short-term interest rates in June 2022, instead of waiting until the Autumn. Fed Chair Powell recently accelerated the Fed’s timetable but he’s also set wealth inequality back an entire generation.
Inflation is like the white guy that kicks you in the ribs when you’ve already endured a hell of a time during the 2020s thus far.