Cashtoons

Is this Inflation?

May 21, 2021

Inflation is about nearly all goods going up in price.

inflation

This makes the cost of living go up,

prices rising

Which causes people to demand higher wages.

higher paycheck

Businesses then pay for the higher wages by raising prices even more. It becomes a cycle.

cycle

This requires a sustained change in prices of most things. So, are we seeing inflation now, or is this just a temporary increase in prices caused by the pandemic?

This snapshot looks like inflation. Too much money chasing too few goods.

money chasing goods

But if we back up, what will we see? Will it still look like inflation?

more money chasing very few goods

Or will it look like a burst of pent-up demand from the months spent in lock down? In this case, the glut of money in the market will be short-lived, as will the shortage of goods.

less money waiting to buy more goods

Many think this is what’s happening. Nearly nothing has been normal for the past year. It makes sense that there will be an imbalance as we reopen the economy.

Next week, we go back to investing. Why is trusting a dumb computer with your money sometimes better than trusting a smart human?

Sources

sources

https://www.npr.org/podcasts/381444600/marketplace

https://www.nytimes.com/2021/05/20/upshot/inflation-five-questions.html?searchResultPosition=3

https://www.investopedia.com/terms/i/inflation.asp

Market Place Podcast episode on inflation and deflation https://www.npr.org/2020/07/01/886036317/inflation-deflation

https://www.nytimes.com/2021/05/12/business/inflation-consumer-price-index-april.html?campaign_id=9&emc=edit_nn_20210513&instance_id=30730&nl=the-morning®i_id=133403561&segment_id=57934&te=1&user_id=e6be883bf2b0cf3fe185234a6db4ad33


© 2022