U.S. hyperinflation situation is critical

Vegetable prices, fruit prices, prices of various condiments, milk prices, eggs, meat prices, cooking oil prices, ranging from 20% to 200%; gasoline prices, rent prices, real estate prices, new cars, used cars are up …… end of the year, a “rise” in the sound, Americans face every day food, clothing, housing and transportation are much more expensive, high inflation situation is becoming more and more severe.

In the past year, U.S. gasoline prices soared more than 50%, energy prices jumped 30%, used car prices jumped 26.4%, ham prices rose 20%, egg prices rose 12%, the price of washing machines and dryers rose 15% …… almost all commodities are increasing in price. Excluding inflation, the average hourly wage for Americans in October 2021 was actually down 1.2% from a year ago.

By the time I went to press, the price of regular gasoline at U.S. gas stations in Northern California was almost close to $5 per gallon, and it took $40 to fill up a car six months ago, and now it’s at least $60. There are Chinese in the U.S. East Coast a port to open a Chinese take-out store, the high price of goods into its suffering: the original can of peeled garlic $ 15, is now $ 50; 5 gallons of corn oil in the past $ 20, now $ 42; chicken leg meat in the past $ 0.99 per pound, now $ 1.6 per pound; once more than $ 20 a box of canned water chestnuts, now $ 70 are difficult to buy. And in the Silicon Valley area, barely keeping open the price of the Chinese restaurant dish code, generally than a year or two ago to raise 50% to 100% or even higher.

From Chinese supermarkets to Costco, Walmart and other large, affordable stores, some goods are now difficult to “people-friendly”: in San Francisco’s Chinatown supermarkets, rice noodles are now priced at $1.69 per pound, compared to $0.69 per pound six months ago, an increase of 145%, and a box of tofu used to be 0.99 U.S. dollars, now 1.5 U.S. dollars; open market customers in the beef, pork have gone up about 80%, beef no more than 4 U.S. dollars a pound, crab, lobster prices rose nearly double, vegetable oil rose more than double …… daily chemical giant Procter & Gamble (P&G) has earlier raised the price of baby diapers, toilet paper and other products. October 2021 and announced that it will raise the prices of oral care, razors, hair and skin care products.

The U.S. Department of Labor reported in December 2021 that the U.S. Consumer Price Index (CPI) increased 6.8% year-over-year in November of that year, well above the 2% inflation ceiling set by the Federal Reserve and the largest increase since June 1982 (the 1982 inflation rate was 7.1%), with commodity prices rising almost across the board.

U.S. Department of Labor data show that U.S. energy prices rose 3.5% in November 2021, up 33.3% year-over-year, with gasoline prices up 58.1% year-over-year; food prices rose 6.1% year-over-year, with pork prices up 14.1% from a year ago, the largest increase since 1990. Used car and truck prices, which account for a major share of inflationary growth, rose 31%. Used car sales are up and prices are soaring because of a shortage of new cars in the market due to chip shortages and overpricing (new car prices jumped 9.8%, the largest increase since 1975). As of December 15, 2021, prices of used cars in the U.S. are still rising rapidly and have not yet reached their peak. In addition, prices for furniture and bedding saw the largest increases since 1951, tires and sports equipment saw the highest price increases since 1980, and consumer food and beverage prices increased 5.3%, the largest increase since 1982.

U.S. rents and home prices also continue to rise, with the median sales price of a single-family existing home climbing 16 percent from a year ago to $363,700, according to data released by the National Association of Realtors on Nov. 10, 2021. It’s almost impossible to buy a home in the U.S. today, no matter where you buy it, without a 10 percent or more price increase, and building materials have gone up even more, and the cost of building a home has risen more than significantly.

According to a Gallup poll (1,600 respondents) released on December 2, 2021, nearly half of the households surveyed feel the economic pressure in the face of increasingly severe inflation; about 10 percent of them say the economic hardship caused by inflation has been so severe that it affects their daily lives. Low-income households were particularly affected, with 71 percent of those earning less than $40,000 per year reporting they were experiencing hardship, compared to 47 percent of middle-income households and 29 percent of upper-income households.

A poll released Dec. 9, 2021, by the Associated Press-NORC Center for Public Affairs Research shows that 67 percent of households are spending more than they did before March 1, 2020. Most Americans also said prices have increased significantly in all aspects of life, including groceries, gas, electricity, holiday gifts and services. The poll also found that 57 percent of Americans disapprove of the way Biden has handled the economy.

A Federal Reserve Bank of New York consumer survey showed that U.S. consumers’ inflation expectations for 2022 rose to a new high of 6 percent, while consumers’ expectations for personal income growth in the New Year fell to 2.8 percent, indicating that U.S. consumers estimate that inflation will rise twice as much as wages in the near term. Other data from the survey also indicate that consumers expect prices of most key necessities to rise by about 10% in the new year. Among them, gasoline prices are expected to rise by 9.15%, food prices by 9.24%, health care costs by 9.6%, rents by 10.03% and the cost of a college education by 9.1%, the largest increase since March 2015.

The endless New Crown epidemic has led to a “flooding” of monetary and fiscal policy in the U.S., inevitably pushing up prices and exacerbating social hardship. Roosevelt’s New Deal brought the U.S. out of the Great Depression, but now, after two years of spending nearly $10 trillion, the U.S. is still ravaged by the new epidemic, prices are soaring, supply shortages, nearly half of all households are in financial distress, and low-income families have to struggle through the “severe winter. The uncontrolled printing of money will inevitably lead to the bad consequences of inflation. House Minority Leader Kevin McKenzie believes that President Biden and Speaker Pelosi’s stimulus plan is a “complete failure” and that the cost of living in the United States is experiencing the highest spike in the past 30 years. It can be said that although the U.S. economy is starting to recover, the high inflation rate, rare in decades, annihilates the U.S. economic growth rate (5.5%) in 2021.

High inflation is also forcing politicians to start looking at tariff policies. U.S. Treasury Secretary Yellen recently bluntly stated that the tariffs imposed on Chinese imports to the United States during Trump’s presidency “have no real strategic rationale, but have created problems”. She argued that tariffs of up to 25 percent on hundreds of billions of dollars worth of Chinese goods to the U.S. each year “have led to higher prices in the United States. She also said she would work to lower those tariffs by restarting the exclusion process. Former U.S. Treasury Secretary Jacob Lew also said the removal of tariffs on Chinese imports to the U.S. would help ease U.S. inflationary pressures. According to the report, the U.S. tariff rate on Chinese imports to the U.S. will average 19.3 percent on a trade-weighted basis in early 2021, well above the 3.1 percent rate in early 2018.

Increasing inflation is not only seriously affecting the U.S. economy and people’s lives, but also directly impacting the administration’s economic agenda and Biden’s approval ratings. A social spending and climate plan of about $2 trillion pushed by Biden and Democrats was blocked, and even Democratic Senator Manchin questioned whether the bill would further fuel inflation.

Unless the Federal Reserve and the Biden administration change their current approach, inflation will have particularly severe consequences for the socially vulnerable, namely the poor, women and minorities, according to a Nov. 16, 2021, article on Fortune magazine’s website. The article specifically reminded the American people not to listen to the so-called “inflation is good for the poor” argument, the reality is often much harsher. The article exposes the absurdity of the arguments circulating in U.S. society, such as the claim by the former executive director of BlackRock, a leading U.S. asset management firm, that “non-affluent groups are more likely to benefit from higher levels of inflation. Inflation has led to a grossly unequal distribution in the first place, eroding the purchasing power of all; but the working class is clearly more trapped by high inflation, and their spending power and living standards are deteriorating. Summers, another former U.S. Treasury Secretary and Harvard professor, raised inflation concerns in an article in the Washington Post back in February 2021: “Macroeconomic stimulus on a scale closer to World War II levels has the potential to trigger inflationary pressures not seen in our generation, affecting the dollar and financial stability.” After a detailed analysis of the inflation situation, Summers estimated that the monthly output gap in the U.S. economy is about $30 billion, while the fiscal stimulus proposed by the U.S. government is equivalent to nearly $200 billion per month; excessive economic stimulus will certainly bring inflation, and the U.S. is facing a “pretty severe” inflation situation.

However, Summers’ warning fell on deaf ears of the Biden administration. The Biden administration and Federal Reserve officials ignored the risk of inflation in early 2021 and pushed Congress to pass the $1.9 trillion economic bailout plan proposed by President Biden. Federal Reserve Chairman Jerome Powell said fiscal stimulus would only temporarily push up inflation levels and that prices are unlikely to continue to rise sharply. White House and Fed officials have been asserting for the past six months that inflation is only a temporary or transitory feature of the U.S. economy because price increases are driven by supply chain bottlenecks, while supply-side constraints have suppressed auto manufacturing, housing construction and food production, and that inflation will fall back once supply and demand converge. But it turns out that U.S. policymakers have misjudged how absurd the so-called “temporary theory of inflation” and “theory of inflationary benefits” are. Powell had to change his tune, saying that the series of inflation and employment data released in late October and early November 2021 really made him realize that the risk of U.S. inflation rising to higher and more persistent has risen, and the Fed needs to shift monetary policy. The Fed formally rejected the “temporary theory of inflation” after its monetary policy meeting in mid-December 2021, while deciding to accelerate the scale of asset purchases to pave the way for the launch of interest rate hikes in the first half of 2022. The Fed hinted that the timing of the first rate hike in the New Year will depend entirely on the path of the job market, which is expected to continue to improve in the coming months.

Looking ahead to 2022 U.S. inflation levels, Wells Fargo (WELLS FARGO) securities economists expect that with further increases in service prices, by the first quarter of 2022, the U.S. consumer price index (CPI) will rise to about 7% year-on-year; and wait until after supply chain bottlenecks tend to ease, by the second half of 2022 U.S. overall inflation will have fallen, but the annual U.S. CPI will still rise by more than 5%. The problem is that the above assumptions or projections are predicated on a steady improvement in the epidemic, and the expected normalization of the global epidemic in the second half of 2022 is the “soft landing” scenario that policymakers are outlining and hoping to see. Even if inflation gradually slows in the future, the economy steadily recovers, and unemployment remains low, the impact of inflation on the U.S. economy will continue for quite some time, while the supply chain crisis eases and the labor market steadily repairs are unlikely to accelerate.

The Federal Reserve forecasts a 4% U.S. GDP growth rate in 2022, exceeding the projected price increase of 2.6%. The U.S. is counting on 2022 as a year in which the economy gradually returns to its normal course; however, the challenges remain daunting, and the economy’s return to its normal course requires fiscal and monetary policy normality and rationality. In the new year, how to reduce the risk of a new crown epidemic, and how to achieve a better balance between economic recovery and inflation control are serious tests that the White House and the Federal Reserve cannot escape.