At a time when inflation has become the bogeyman haunting the global economy, it’s more important than ever to dissect its origins and implications. Yet, amidst the chaos of blame-shifting, there seems to be an insidious underlying current: conditioning society to shoulder the responsibility for the economic turbulence we’re currently mired in.
In the heat of the pandemic, the world saw a surge in savings and home improvements, but contrary to popular narrative, inflation didn’t immediately skyrocket. Only recently have we found ourselves in these white-hot conditions. So, the question remains, why are consumers, who were merely adapting to a world turned upside down, now held responsible for this inflationary surge?
Let’s rewind to the pandemic-era economic landscape. Money was practically free for banks, interest rates teetered on the brink of negativity, and central banks like the Reserve Bank of Australia (RBA) and the Federal Reserve were adamant about not increasing rates, with the RBA even declaring they didn’t anticipate a need to hike rates until 2024.
Fast forward to today, and the consequences of those decisions are glaringly evident. The brakes have been slammed on, interest rates have risen rapidly, and living costs have soared to uncharted heights. We were repeatedly reassured that inflation was transitory, a temporary blip on the radar. Alas, instead of a blip, we found ourselves staring at an ominous mountain range of alarming quarterly figures in 2022.
Interestingly, as the cost of living continues to pressure households and consumer confidence crashes, inflation, while still high, is starting to fall. We’re seeing less consumer spending, yet inflation remains stubbornly persistent. It’s as though the economic beast has been wounded but refuses to die, adding to the problem.
Enter the elephant in the room: record corporate profits. This phenomenon hints at an uncomfortable reality, ‘greedflation’. Despite the rising cost of materials and other inputs, companies are reaping unparalleled benefits, while real wages in places like Australia are falling. While voicing concerns about a wage-price spiral, the RBA has yet to see their fears materialise. Meanwhile, hardworking individuals are falling behind due to inflation, and to add insult to injury, the RBA has again increased rates by 25 basis points.
The confluence of these factors creates a grim picture for everyday consumers. It’s no longer about splurging on the latest TV but about grappling with necessities such as rent, electricity, and food – things people can’t easily cut back on.
So why the orchestrated attempt to make society bear the burden of inflation? Acknowledging the roles of central banks and government policies would mean admitting to a spectacular failure. Shifting focus to consumers and their pandemic-spurred habits diverts attention from the lack of foresight and poor decision-making that contributed to our situation.
It’s essential to remember that the blame doesn’t solely lie with consumers. External forces, central banks, and government policies have all played a part in creating this economic maelstrom.
The current climate is a call to action, not just for economists and policymakers, but for everyone to be vigilant, informed, and ready to challenge the narrative. To steer the ship away from this storm, we need to demand accountability from these entities and push for improved decision-making. By understanding the problem and addressing the root causes, we can hope to regain control of our financial futures and build a more prosperous, stable world.