top of page
  • Writer's picturePhilip Drucker

Communique "Giving Thanks For Inflation" 11-24-2021

In simple terms, Inflation is best described as measuring the rate at which the value of a currency is falling. Inflation comes into play when there are too many dollars in the market chasing too few goods. Hence, as the price of goods and services goes up, the buying power of each dollar is reduced, it costs more to buy, yet the underlying value of the currency has not, and the result is rising prices at both the wholesale and retail levels of the economy.

Now, I’m not saying if you are the average consumer in America that you would be glad to see your stable paycheck and/or income stagnate while the cost of basic items rises, often going through the roof. But on the other hand, in a capitalist society, economists are split on whether inflation is a positive or a negative on the overall economic outlook.

For you see, inflation helps boost consumer demand and is a force for driving economic growth. When demand and consumption are up, the rules of supply and demand compels manufacturers to re-invest in their companies, as opposed to giving higher bonuses to those executives who don’t need or deserve them, to make more goods to fulfill consumer demand.

As manufacturing picks up, inflation goes back down with possibly the best part of the equation being more goods means hiring more employees/workers, the persons who do the hard work and labor, and as the unemployment pool tightens, the value of the average working man’s labor goes up. This creates even higher wages for the employees as they now find themselves in a “labor friendly market” with increased mobility to change jobs, going to a competitor if necessary, that results in higher wages and increased buying power.

Inflation is also seen by many economists as having the additional advantage of curbing deflation that occurs when the inflation rate falls under 0%, that measures the general decline in prices of goods and services that can decline due to changes in the supply and money available, but also due to you guessed it, increasing productivity in the marketplace and the obsolescence of goods and services no longer wanted or needed by consumers.

When it comes to measuring the basic effects of inflation and deflation on the overall economy, it is generally assumed that stagnation is bad while an energetic, moving and vibrant economy, indicated initially by the introduction of inflation, is far better for instilling consumer confidence and hence, another positive driving economic prosperity through growth.

Remember, we are still in an economic recovery phase and there are still any number of factors that can slow down if not stop dead in its tracks our recent increases in employment and workplace opportunities that result in higher wages and hopefully a booming economy.

Very circular, isn’t it? Not the parallel or flat line images often exemplified by arrows, that is truly the nature and shape of a healthy, vibrant economy.

Furthermore, inflation is part of American Exceptionalism in the world market as it helped create part of the economic post-war miracle that in the end created the middle class.

In the beginning of the 20th Century, America realized it no longer needed to be a nation of farmers, and members of the artisan or merchant classes for as the rise of the assembly line eliminated the need for individuality in manufacturing, it created the idea that everyday laborers could be the very consumers for the goods they were making. This led to the ability of a far greater number of workers than previously thought possible to attain the vestiges and attributes of a modern society through purchasing the now mass produced and far cheaper items they themselves helped create. Once again, very circular, isn’t it? Remember the goal of Henry Ford? It was to,

“democratize the automobile”

Meaning, anyone who wanted one should have the means and opportunity to have one. Of course, Henry wasn’t a complete dreamer, and as a realist he also promised potential customers and consumers,

"You can have it in any color you want, as long as it is black."

If you ask me, this is as American as it gets. And, he was right for shortly afterwards to accommodate the driving class America began investing in roads, bridges, and traffic lights, you know building infrastructure to match the new innovations being released into American society. Don’t forget, more mobility means more opportunities to be had in the job markets. Is this sounding a bit familiar to, let’s say “Build Back Better?” It should because it is. In fact, it’s the American way.

Or, we can sit around and continue to lament that all the money appears to be in the hands and off-shore of three sociopath Billionaires who have nothing better to do than shoot phallic rockets into space while ignoring the plight of the average American working family that cannot pay their mortgages or as is all too frequent, feed their children.

Oh, and all that as we grouse about paying a few extra pennies or dollars at the checkout stand due to tax benefits for often unemployed, or under employed workers with no health insurance who could not afford any of those “luxuries” until now. The now being President Biden’s American Rescue Plan. A plan that makes an investment not in big, uncaring corporations (if I hear shareholder value one more time I’m going to scream) or the 12 people or so who just happen to be GQP donors, but where it belongs, in the American people.

I don’t know about you, but I have no problems paying a few extra bucks at the cash register for a chance to revive and make stronger than ever that which propelled America to untold dominance in the world markets and overall greatness in the first place, the Great American Middle Class.

It might sound a bit funny, but when you buy that big, fat Butterball Turkey this year and you notice the price may have gone up a few cents, buy it anyway for you will be helping our economy by releasing more capital into the market place that will spur the ability to pay for more manufacturing and services, driving higher employment and wages on the “other end” of the economy and as in a capitalist environment, more innovation to create better and often cheaper products we as consumers, all want and need.

So, when it comes to inflationary worries, breathe deeply, clam down and let history be your guiding light for this too, shall pass. Happy Thanksgiving everyone! Gobble gobble!

Like My Blog? Buy My Latest Book? I'd Be Thankful If You Did!

2 views0 comments

Recent Posts

See All
bottom of page