If you have been awake and shopping for groceries past few months, you would have noticed a sudden jump in grocery bills. They are lost 20% up. In essence what you bought for $100 now is costing you well over $120, even more depending on what it is you are stocking up on.
So how did this happen?
You have probably heard it’s the Fed’s fault, may be the government’s fault. They gave money to people to sit when the country was in lockdown over virus which btw is going to be with us forever as is quite evident.
So let’s talk first about Fed’s and the QE (quantitative easing). Since the housing and stock market crash of 2007-2008, the Federal Reserve has been buying assets. Now keep in mind that Fed of the United States have almost unlimited amount of money. So you are looking at billions of purchases a month. This has been going on since after the housing crash. But inflation was hardly out of control until last few months. So Cleary it’s not the fed who drove up inflation.
Is it the Ukraine/Russia war?
The war did increase our gasoline prices to highest in decades. That’s because Russia controls the majority of field supply and EU heavily relies on Russia for gas.
Now what about increase in everyday prices like food, clothing, furniture etc?
Are these result of fed or war?
As it turns out, none. Even though QE did have an effect on inflation but the real kicker came form lockdowns? See without the lockdowns and shutting of economies, the global supply chains runs smooth. Manufacturers make the items, farmer grow the food and all moved in almost perfect sync and the raw material turns to final product and is then distributed to the end consumer. It’s almost as if a smooth life cycle of the item from raw material to final product.
To give you an example, the red onions that you are eating today are well over a year old. Once taken from the ground, they were stored in world class facility where they remained fresh for years and now land on your table ready to be used with your meal.