Perspective on Inflation
Terry H. Schwadron
Nov. 29, 2022
Through election season and even into the start of holiday weeks, the reports in this country about the effects of high prices have felt overstated when compared with underlying economic factors.
Discord and discomfort may make for good politics, but — with exceptions — are emphasizing particular price spikes for consumers who continue to show up in big numbers to spend on the full gamut of consumer goods and still seek out houses, cars, and expensive electronics.
The “Black Friday” shopping results from the weekend show a spending trend little affected by the dire calls about our national economic report card. A report from Adobe Analytics said consumers spent more than $9 billion on Friday alone, what looks to be more than that yesterday for Cyber Monday, and the online holiday season shopping is projected to hit $210 billion, all above the last two years. Yet headlines continued to blare wariness about spending with a variety of less-than-rigorous statistics.
Yes, prices are higher year over year comparing the impact of a still-growing economy over the covid lockdown times. But the sky is not falling, and prices seem to be peaking. Our lumbering government is taking action, and the strength of the U.S. dollar is protecting against the far more severe effects going on elsewhere.
Nevertheless, the storyline continues punctuating our national politics, where partisans want to hang high prices on Joe Biden rather than on global trends, the effects of covid supply and demand changes, and the impatience with a Federal Reserve program that is intended to take its time — by raising the cost of borrowing.
The last month showed prices starting to moderate, but you don’t hear that as loudly as the voices of doom.
A Visit to Argentina
That note of false direness is particularly strong for me after a visit to my Argentine family. Rather than inflation being pegged at 7 percent or 8 percent annually as here, Argentina is dealing with what is approaching 100 percent inflation this year.
In the two weeks that we traveled to Buenos Aires, the exchange rate of the Argentine peso, officially set at about 165 pesos to a single U.S. dollar, went from 280 pesos per dollar to 316 pesos per dollar on the unofficial or black market.
That means the value of the peso dropped about 10 percent while we were in that country.
Now you’re talking inflation.
For U.S. visitors, it meant that buying many goods, mainly food, for example, was highly favorable. But if you get paid in pesos, it has made a difficult life yet more miserable to keep up.
There is a scramble to buy while one can, even as local businesses keep shifting prices to match the currency. Prices for normal consumer goods and services are in the thousands of pesos, of course. In Buenos Aires, some merchants, even taxis, would prefer payment in dollars.
It is totally normal to “know a guy” to exchange a few hundred dollars for a couple of bricks’ stack of pesos, something I witnessed myself.
The black-market practices are forced by a government that never pays its bills, that cannot bring inflation or prices to bear, and that sets and resets arbitrary, often bizarre rules for businesses trying to keep track of legal compliance with how to do ordinary trades in a country increasingly depending on imports.
In lieu of anything resembling economic stability, we were there for a new national holiday that celebrates nothing but provides another day off work for which workers are paid. The wealthy in the country are doing fine, but a vast growing sector are growing poorer.
There is no end to Argentina’s spiral in sight. My unofficial conversations showed that Argentines have little faith in government altogether as a source of problem-solving, and that government more readily is identified as a source of corruption than service.
Get Some Perspective
In short, the cost of this level of inflation is the destruction of a middle class, the elimination of jobs and hunger, and a constant scramble. In America, the cost of inflation is griping. We ought to be able to tell the difference.
It takes someone with more economic knowledge than me to understand how best to intervene in these situations. Price controls are out, borrowing controls don’t seem to have effect, and the frenzy for daily currency is running at the fervor levels for the national soccer team in the World Cup.
What I do conclude however, is that our American discussion about the discomforts — however temporary or long-term — of prices that are forcing us to think twice about making some consumer purchases is at odds with the experiences of other countries.
Our politicians would do well to heed what is happening elsewhere if for no other reason than to pay attention as trust in government and other institutions is slipping away.
Bombast may work at the ballot box, but as we already can tell, there are exactly no policies emergent in a newly elected Republican House majority that are aimed at reducing prices while maintaining services.
Indeed, it takes some brass for two political parties that just spend $17 billion on getting elected to talk about prices in the supermarket that they never can help to control.
Our trip was personal and about family. But it came with a visit to Perspective about how we discuss our economic fate.