The United States hasn’t seen significant inflation in almost 40 years. That may change soon, thanks to a massive federal deficit, pent-up demand when quarantine restrictions are released and a shift in Federal Reserve monetary policy. Last last week, Bill Dudley, the former president of the Federal Reserve Bank of New York, made waves with his column, “Five Reasons to Worry About Faster U.S. Inflation,” for Bloomberg. On Monday, however, two of the publication’s economic reporters called 2021 inflation a “mirage.”
Inflation Is an Increase in Price Levels
Inflation is the opposite of deflation, which is a decrease in price levels. Since the 2008 financial crisis, the US economy has experienced very low inflation and even deflation. Outside of a few sectors, such as health care, Americans have not had to deal with many unusual price increases.
In 2021, however, as Reade Pickert and Vince Golle explain at Bloomberg, “Americans are likely to see prices jump across a variety of sectors next year, thanks in part to Covid-19 vaccines that will potentially turbocharge demand for such pandemic casualties as travel and tickets to sporting events.”
Inflation and Hyperinflation Are Not the Same Things
A moderate level of inflation occurs naturally in a growing economy. KEEP READING