Is inflation in this country well under control? You might think so if you listen to what’s coming from the Fed on the subject, or even from Paul Krugman, whose analysis of economic matters I usually find quite perceptive.
Unfortunately, however, inflation here is not well under control when you look at it more closely and distinguish between “bad inflation” and “good inflation” as these two measures affect most Americans.
Bad inflation takes the form of higher costs for basics like food and gasoline. Everyone eats and food prices are rising, especially on the most basic of items such as bread and milk products. The people most grievously hurt by these increases are the poorest among us, those on food stamps, now suffering more end-of-month hunger days because there has been no increases in the value of their food stamps.
The other most wide-spread example of bad inflation is the big price jumps at the gas pump. This most directly hurts working people who commute to their jobs, a kind of inflation tax on the working middle class.
Traditionally, in times past, bad inflation hikes on basics such as food and gasoline were offset by good inflation in the form of increases in working people’s wages. Not this time. Not only are wages flat, company paid benefits are shrinking, reducing real compensation still further.
For older Americans, bad inflation hikes on basics also had a traditional good inflation offset — higher interest rates on their savings. As any financial planner will tell you, older people generally put their savings, the capital they depend on to kick off income that supplements Social Security, into ultra safe investments like federal bonds. And as anyone who depends on such securities to generate supplementary income will also tell you, the payback here today is small to virtually non-existent, certainly less than the official overall inflation rate.
This, then, is the good inflation/bad inflation story in this country today. As is true in so many other ways, the poor, the working middle class, the elderly, are getting shafted a lot more directly than well cosseted one percenters. The reason? Because these lucky ones expend a far smaller percentage of their incomes on food and gasoline, and make far higher returns on their far larger capital from investments in Wall Street friendly gaming.