Professor MTSU econ explains our current high inflation


MURFREESBORO, Tennessee (WTVF) – You probably noticed the last time you filled your gas tank or grocery cart, that items got a lot more expensive. Economists blame inflation, but why is it happening now?

MTSU economics professor Charles Baum said that over the past few decades inflation has been so low that most of us haven’t noticed. Not anymore. “Food prices, energy prices, car prices,” Baum explained.

He says there are several reasons for this. First, between the stimulus packages and spending bills, the federal government has pumped billions of dollars into the economy, which means a lot of Americans are willing to spend. “Businesses, employers, and wholesale and retail stores are seeing that they can charge higher prices while selling their products, and so we are seeing the prices go up,” Baum said.

But supply cannot keep up with demand. “There are a number of goods and services that could not be produced due to some kind of disruption,” he said.

The supply chain problems we are now experiencing began at the worst of the pandemic, when some industries halted production. It’s only getting worse now, as businesses grapple with a labor shortage. Baum says that several things are happening at the same time; some choose to withdraw from the workforce as baby boomers reach retirement age. “And they’re not coming back to the workforce. They’re staying retired,” Baum said.

All of these factors combined have pushed up prices. The big question is: will inflation stay this high? “The latest forecast suggests that these inflation rates will remain high for the better part of calendar year 2022,” he said.

No matter how long it lasts, there is no doubt you will notice it. “For the majority of the population, people on fixed incomes, inflation is bad because it erodes their purchasing power, their standard of living drops,” Baum said.

Some economists believe we are on track to hit 6% inflation this year. This would be the highest rate we have achieved since 1990.

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