Can The Inflation Crisis In The U.S. Be Stopped?

In 2021, inflation rose at a rate not seen in more than three decades. Congress gave the Federal Reserve a mandate to maintain stable prices. The bank, with its power to lend and set interest rates, is getting a test in the form of a snarled supply chain and a world continuing to recover from the pandemic. As a result, economists across the spectrum wonder if the Fed can control this bout of price spikes.

Heading into 2022, the Federal Reserve is stuck in a game of chicken with the U.S. economy. Sectors such as energy and autos are hitting double-digit inflation rates, which are piling costs on for consumers.

The central bank first said the eye-popping inflation figures reported in late 2021 are “transitory,” although it is now dropping that word from the messaging. Earlier in the year, the global supply chain was brought to its knees as traffic jams piled up along trade routes. Meanwhile, early retirements picked up and younger workers started to quit their jobs at the fastest pace on record.

Lawrence Mishel, a distinguished fellow at the Economic Policy Institute, says, “There’s a lot of reasons to think that inflation is transitory. It doesn’t mean it’s going to be two months, it could be a year, but it’s not going to be, you know, 4 or 5% a year for the next five years.”

Leaders at the Fed have a long-term target of about 2% inflation. They believe that this rate could produce a healthy and stable economy. But shrinking union membership and the expansion of global trade may have made that difficult to achieve. As a result, the central bank is taking a stance that will invite slightly higher levels of inflation for longer periods of time.

Critics say the Federal Reserve’s approach to policy is flawed because the underlying models are broken.

“I think it’s pretty darn obvious that the Fed cannot control inflation on the downside, or the upside, given the current experience,” says Danielle DiMartino Booth of Quill Intelligence.

The central bank can influence some sources of inflation, such as wages or the housing market. But if they’re coming from areas beyond the Fed’s reach, its policies won’t necessarily be effective.

Correction (November 17,2021): At 14:37, Evan Erickson misspoke that Texpower is building a facility that will be able to produce hundreds of kilograms of material per year. There correct statement is hundreds of tons of material per year.

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Can The Inflation Crisis In The U.S. Be Stopped?

[HafezBd]

Inflation is far more harmful to individuals than a collapsing stock or property market because it directly affects people's cost of living, which they immediately feel. It is not surprising that the current market sentiment is extremely pessimistic. In today's economy, assistance is critical if we are to survive.

[bobbymainz]

How to Hedge Against Inflation: Keep some extra cash on hand, Invest in Various Assets (stocks, real estate, etc.), If you are going to take on debt, better to take it on earlier (assuming you can pay it) before interest rates rise. Refinance

[donaldwilliamfry]

When the government tells you to stay calm and not panic, it is time to realize disaster is at hand.

[BateserJoanne]

It's hard to predict the future until we see this month’s inflation results. However, historical data consistently show that stocks tend to outperform bonds in the long term. Therefore, I'm staying in the market and focusing on selecting high-quality stocks. The challenge lies in identifying these stocks.

[mauriceorayii]

Inflation isn't simply rising prices; it's the devaluation of the dollar.

[Sheil-hard]

I see 2-3yrs recession. Fed will raise interests in Sept 2022 if inflation doesn't peak. Inflation is producing a slew of problems throughout the world, including food shortages, diesel and heating fuel shortages, and housing prices and financial market crash. This global collapse might end up being a part of us for a very long time. With inflation currently at about 9%, my primary concern is how to maximize my savings/retirement fund of about $300k which has been sitting duck since forever with zero to no gains.

[pistolen]

I don't think the government wants to stop inflation, they want it to increase to diminish the burden of the debt.

[graham]

The problem is that inflation isn't really tracking with general income/wealth growth. That growth is mostly happening in real estate and especially in the stock markets. So the rich are soaking up the vast majority of any actual increases.

[kevinmarten]

Yes stocks are pretty unstable at the moment, but if you do the right math, you should be just fine. Bloomberg and other finance media have been recording cases of folks gaining over 250k just in a matter of weeks/couple months, so I think there are alot of wealth transfer in this downtime if you know where to look.

[Robertgriffinne]

A weak dollar can signal an economic downturn, making me to ponder on what are the best possible ways to hedge against inflation, and I've overheard people say inflation is a money-eater thus worried about my savings around $200k

[arnaudsm]

Inflation is just a hidden tax, except low-to-mid class citizens will pay the most of it.

[danabe]

My solution to inflation has been to stop buying anything I don't really need and to buy less of what I need.

[MrApontjos]

Government: Prints out a ridiculous amount of money in the past year
Inflation: *Appears*
Government: *Surprised Pikachu Face*

[CamillaPsh]

The United States is grappling with the challenging combination of inflation and recession. An alarming aspect of this recession is the surge in consumer credit card debt. In April alone, credit card debt escalated by 20%, and rates have doubled within a year. Inflation has reached such heights that consumers are resorting to debt for essential life necessities. The signs of a collapse are evident, and the prospect of more layoffs looms. This is why I am considering entering the market now, anticipating a recovery in the economy. I am in the process of constructing a $600k portfolio. Do you have any recommendations for stocks in this scenario?

[brownkloops]

America is currently plagued by the hydra-headed evil duo of inflation and recession. The worst part about this recession is that consumers are racking up credit card debt. In April alone, credit card debt went up 20% while rates have doubled in a year. Inflation is so high that consumers are literally taking debt for basic life necessities. Collapse has indeed begun. Layoffs will get worse. Which is why I'm looking to enter the market now and ride along as the economy gets back on track. I’m building a $550k portfolio. Any stock recommendations?

[trailguy]

This production couldn’t earn a grade higher than C in my Econ class because it never once mentioned that the way to most effectively fight inflation is to raise interest rates but due to the fact that America’s national debt is 28 trillion dollars, we can not do what Paul Volker did in 1980 to fight inflation: raise interest rates to 20%. Why didn’t they mention the debt? It’s the centerpiece of this whole topic.

[morilea]

sooo we’re gonna pretend like there’s wasn’t massive printing of money?

[veramonique]

Let’s not forget that the biggest payouts in the markets don’t come from great performances but rather it’s great promotions. Stay invested, diversification for streams of incomes is very important

[petergrennonviel]

An an Argentinian, let me explain Inflation to you: Gov' needs to have the money to pay all it's checks. So it prints it, but since wealth is not created by printing money it has to take it from somewhere. So, they take the wealth from the people via inflation... a non legislated tax

[aaronjohnson]

What a terrible system we live in, we want some people to be unemployed and potentially homeless as well as prices to rise a certain amount! What a sinister thing to do to a population