If you're like most Americans, you did a good deal of spending in 2021. Some of those (especially wealthier) Americans were buying up expensive things because they predicted that inflation was only going to get worse. The big question remans: Will you actually be paying more for things in 2022 than you were in 2021?
The indicators, domestically and internationally, don't bode well for a reduction.
Normally, when inflation gets out of hand like it has recently, a wise government will employ "contractionary monetary policy," which simply put, means the government tries to control the amount of available money in the market. The Federal Reserve will raise interest rates to encourage saving. People respond by pulling back on their spending, which slows the inflation rate. None of this is happening. In fact, our government in the U.S. is doing the exact opposite. They're currently trying to pass a record-breaking spending bill. Even if they pass nominal spending bills, all of it will force inflation even higher than is already, naturally occurring. Additionally, the Fed has not raised interest rates at all. So even more discretionary income continues to flow through borrowing.
Let's repeat: The U.S. government is not only doing nothing to slow inflation, they're doing everything they can to speed it up in 2022.
Domestically, America is still SO economically strong that it can weather terrible decisions, but that can't last forever. Lower income nations are already feeling the hurt from similar economic policy.
Consider Turkey. Their annual inflation rate surged to 36% last month, and year-over-year, food and goods are 44% higher than they were in 2021. The reason for this is that the Turkish lira is historically weak against the dollar right now, which is still internationally standard. But the reason that's happened is because of President Erdogan's bad monetary policy. Before 2020, and now since, he has manipulated banks and interest rates to stay low in the face of staggering inflation. Sound familiar?
Politicians are loathe to ask for higher interest rates, because people like to spend freely. That drives most economic indicators higher. But when inflation catches up, somebody's gotta be the bad guy and raise rates and cut spending. Most politicians are too weak-willed to do it.
And who does this affect the worst? Naturally, the poor. The very people those same politicians claim to perpetually help.
But unfortunately, right now, the leaders in Washington are turning a blind eye to it. In fact, every action they take is pushing inflation higher. Get ready for a very expensive 2022.
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