On Monday afternoon, President Joe Biden stood at the Rose Garden in the White House, celebrating with a signing ceremony one of the president’s greatest achievements in decades: the new Infrastructure Law, which will result in a trillion-dollar investment in U.S. course infrastructure. In the 1950s, the federal government did not invest such sums in infrastructure, and Baiden had reason to be proud.
The ceremony, on an autumn sunny day, has been a rather rare moment of light for Biden in recent months. Although in his first year in the White House he oversaw the fastest comeback in history from an economic recession, rising average wages in levels not seen for decades, and a stock market booming – support for him in polls is very low and Americans do not seem impressed by his achievements. The holidays are here right now, they go to the grocery store and pay a lot more for basic necessities, and go to refuel and feel the pain in the wallet. No one really cares that this is a global problem, stemming from supply chain problems due to the corona crisis refusing to end. At the end of the day, what matters to an American who is not interested in politics and does not follow the passage of one law or another, is how much milk costs him. And milk is now expensive.
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Sign in the US: Beer is cheaper than gas
(Erik S. Lesser)
In October, US inflation peaked at three decades, leading to price increases across the product range, from basic commodities to cars. -5%, and the index recorded the fastest rate of increase in 12 months since 1990.
The absurdity is that the American economy is in good shape, consumers are eager to buy products, and suddenly the economy has no ability to meet demand. Senior economist Laura Rosner-Warburton told the Wall Street Journal that she expects half a year of unusually high price increases. “I think we are moving to a new stage where inflation will expand,” Rosner-Warburton said.
Among the causes of inflation in recent months – the opening of trade and economic activity after vaccines became available and a large part of the restrictions were removed. Thus, fuel prices soared in October by almost 50% compared to the same month a year ago. Grocery products climbed 5.4%. Pork prices rose by 14.1% compared to last year – the largest increase since 1990.
New car prices soared 9.8 percent in October, the biggest increase since 1975, and furniture and bedding prices have jumped the highest since 1951. Tire and sports equipment prices have risen the fastest since the early 1980s. Restaurant prices have risen 5.3% – the sharpest since 1982. The rises were felt most strongly in countries in the southern United States, where the economy opened very early, but where the corona delta strain also hit hardest.
The absurdity is that the American economy is in good shape, consumers are eager to buy products, and suddenly the economy has no ability to meet demand. Economist Laura Rosner-Warburton told the Wall Street Journal that she expects half a year of unusually high price increases
Another point that is affecting inflation is the shortage of available workers, as Americans continue to leave jobs and refuse to return to work in pre-Corona conditions. The shortage causes higher wages and adds to the motivation of companies to raise prices to offset costs.
The White House acknowledged this week that inflation is a real problem. Biden’s economic adviser, Brian Dis, appeared on all political programs on Sunday and said, among other things: “There is no doubt that inflation is high right now. “When the president took office, we faced an overall economic crisis, and now unemployment is very low, wages are rising and the economy is in good shape.”
Diss, as well as Treasury Secretary Janet Yellen, argued that the infrastructure law Biden signed this week, and another investment plan the Democrats hope to pass in the coming weeks, will ease the pressure and open the bottleneck. If that does not happen fast enough for next year’s Thanksgiving to be significantly cheaper than it will be next week, Biden will say goodbye to the Democratic majority in Congress.
And in Europe the situation is no better. For example, in Germany: If the Germans have not had enough of the blows the country has received in the past year: Corona, the energy crisis, Merkel’s retirement after 16 years, Putin’s incessant provocations, Brexit and entering a budget deficit, here lies the perhaps most frightening blow of all. Of the country – inflation.
“The whole supply chain of raw materials has been hit. There are shortages of materials like plastics, paper and metals, so companies are moving to local production, which requires recruiting local workers, and that translates into higher salaries, which is another addition to inflation. “There is currently no expectation of any drop in energy prices, especially in the coming winter months.”
October was the fourth consecutive month in which inflation in the country soared, this time to 4.5%, a new inflation record since 1993. “And the second is the temporary reduction of VAT as part of the Corona easing.” Financially.
“The whole supply chain of raw materials has been hit. There are shortages of materials like plastics, paper and metals,” Nicklas explains, “and then companies start moving to more local production, which also requires recruiting local workers, which translates into higher salaries, which is another addition to inflation. “It’s really bad that it’s only going to get worse. There is currently no expectation of any drop in energy prices, especially in the coming winter months.”
“Once upon a time companies used to buy chips just before production and according to the size of production. Today they buy and store because they do not know when there will be a new supply. Since only large companies can do that, we will see in 2022 more and more small business bankruptcies, backbone Of the German Economy “
And it’s not just Germany. The inflation of 3.8%, recorded in September in the 19 countries that use the euro, is the highest since 2008. While inflation helps manufacturers and service providers improve the balance of profits hurt as a result of the corona, it is the consumers who bear the burden. Heating and electricity prices have risen, food products have risen by more than 13%, including a 20% rise in meat prices, a 35% rise in potato prices and a 13% rise in dairy prices. Prices for cultural and entertainment and hospitality shows also climbed. “Some companies will continue to raise prices,” Carsten Reynolds, an economist at Capital Finance Research, told the Financial Times, “and some companies, like carmakers, will have difficulty producing as before and will therefore be obligated to cancel the discounts they give.”
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Price increases also in Europe
(Frank Augstein)
The concern and economic uncertainty of German citizens quickly translated into tabloid attacks on the European Central Bank as responsible for inflation. After calling the bank’s former president, Mario Draghi, “Dragilla” because he allegedly sucked up the bank accounts of EU residents, the Bild newspaper launched a campaign against Christine Laggard, the current president, whom he calls “Lady Inflation” and claims it is neglecting retirees While walking around dressed in designer clothes.
Not only consumers are absorbing the economic roller coaster. Aluminum prices can go up by 50% in one week, steel prices by 100%, not to mention the chips, where there is a shortage and a pirate market where anyone who can buys as much as he can. “It’s a bit of a jungle economy,” Nicklas explains. “More and more small business bankruptcies are the backbone of the German economy.” Many economists and politicians warn of economic crisis, layoffs, the devaluation of the euro, all while the corona is still affecting the lives of many. That is, a recipe for social explosion.
“Many work part-time, factories are partially shut down but profits are flying off the roof. This is an illusion that will not last long. For the most part profits are a good thing for the economy because companies invest and create jobs, but now companies prefer to save profits. It is very dangerous to have huge companies Billions and a private sector that absorbs all the costs “
But every losing side must have a winning side that balances the picture: After record profits in the first half of the year, the 30 major companies traded on the Frankfurt Stock Exchange and make up the DAX index, showed an 8.6% increase in sales and 152% operating profit in the third quarter. The German car industry reduced its production by almost 30% compared to the third quarter in 2020, and still Mercedes and BMW recorded nice profits (20% and 38% respectively). Telecommunications company Telecom said its business was better than ever and the company was recording record profits, while adidas’ profits jumped more than a billion euros in the first nine months of the year. The DAX index itself has risen more than a thousand points since the beginning of October. The European stock index and the Nasdaq stock exchange are also rising significantly.
how does it happen? Again, high demand for products compared to low supply, but also the recession of the corona, which led to many bankruptcies and reduced competition, and allowed large companies to drop all the increase in prices on the final consumer. “A lot of people still work part-time, a lot of factories are partially shut down because they have no materials, and still profits are flying off the roof,” says economist Nicklash. “Work, strengthen research and development. But companies will now be very hesitant before investing. The situation is unclear. They will prefer to save those profits. It is very dangerous for a company when on the one hand there are huge companies that make billions, and a private sector that absorbs all these profit costs.”
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