What is inflation?

A couple years back, I attended a town hall hosted by my House representative, Gabe Amo. During the Q&A, a gal who I judged to be in her 20s referred to the current economic situation as “hyperinflation.” That was nonsense, of course. Hyperinflation is defined by prices rising ofer 50% monthly.  Historic examples of hyperinflation include Hungary in 1946 (41.9 quadrillion % monthly), Zimbabwe in 2008 (79.6 billion % monthly), Yugoslavia in 1994 and Weimar Germany in 1923, where currency became nearly worthless. I’m old enough to recall the double-digit inflation of the early 1980s, and I wouldn’t call that hyperinflation, let alone the inflation of the early Biden years.

Where does this come from? In a think piece over at TPM, Josh Marshall takes a stab at this.

“I was reminded of this because in the new episode of his Strength in Numbers podcast G. Elliott Morris proposes that if you look at recent economic history through the different prism of “excess prices,” everything comes into focus. As the summary of the podcast puts it, “Elliott’s analysis points to a different culprit: Prices are roughly 10% above where they’d be if pre-COVID inflation trends had continued, and traditional economic models fail to account for this because they use year-over-year inflation rather than cumulative price shocks.” He notes that with this metric, recent public opinion trends all fall into place. It also makes sense of public opinion during the high inflation of the 1970s. The critical additional factor is that you have to adjust for the public’s familiarity with inflation. This always seemed to me a key part of the post-COVID equation. The vast majority of the U.S. population had never experienced high inflation during their adult lives. As a lived experience it was all but unknown. That makes a big difference.”

 

I think this is right. All the economists in the world aren’t going to convince Joe Public that his wallet hurts more than it used to. As Josh says, this impression will hurt whichever party is power. Right now, that’s the GOP, and they’re staring at a potential bloodbath in November and another in 2028. The challenge for Democrats, if they reap the rewards of this disaffection, will be to manage the public expectations long enough to push through policy changes that roll back the Trump fascistic trends.

https://talkingpointsmemo.com/edblog/understanding-what-inflation-really-means-in-electoral-terms/sharetoken/5fe1ba67-5ec9-4a91-8969-8bca4ba68f60

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