Rising prices, climbing interest rates and devastating recessions are some of the effects of inflation.
Inflation typically results in an overall increase in prices and cost of living in a county. Currently, the U.S. has an inflation percentage of 8.5%, which is causing items such as gas, groceries, homes and more to increase in price. Inflation can be caused by many factors, including an increase in the amount of money in people’s bank accounts, a large decrease in the number of goods being produced and an increase in the amount of dollars being printed.
Alex Cartwright, an associate professor of economics, believes the most recent inflation surge was caused by the excessive amount of money being printed.
“I believe we’ve almost tripled the money supply,” Cartwright said. “We printed over $400 million an hour for over a year. The artificially low-interest rates that the fake money created caused inflation… Inflation fundamentally occurs when the money supply is expanded. When we create more money, the purchasing power of each individual dollar falls, and because each dollar can buy less stuff, people require more dollars in order to sell you something. Requiring more dollars to sell you something is the same as a price increase.”
Another factor to consider when evaluating the causes of inflation is the increased amount of money individuals have curated since the start of the pandemic.
Tyler Watts, an associate professor of economics, believes the increased amount of spending money and a possible decline in the production of goods has led to increased prices.
“Inflation is too much money chasing too little goods, and that can happen either because there was a big increase in the number of money people have or because there was a big decrease in the number of goods being produced,” Watts said. “When we look at the inflation that’s happening, it’s pretty much over the past year and a half or so. It’s not so much because there was a reduction in the goods we are producing now, that did happen in the COVID lockdowns, but we quickly rebounded and the economy is still cranking out goods, so we can trace what’s happening.”
Inflation is always a difficult situation to be in because supply and demand is off-balance, and it can be hard to know when it might return to a normal level.
Cartwright says inflation can be very difficult to measure because there is no price level, and there is no average price for items. He says we can’t measure inflation, but what we can do is approximate it, and the most common way to do so is with the Consumer Price Index. The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. With this approximation, we can be more prepared for increased prices and make necessary adjustments to stay afloat during this time.
Education sophomore Rylie Avery says she has seen and felt the effects of inflation while paying for gas or going shopping.
“… It’s getting harder and harder to keep a budget where you don’t drown in debt,” Avery said. “Even Goodwill prices are riding way higher than many can afford, so shopping second hand doesn’t help as much as it used to.”
Avery once heard from a higher-up working at Goodwill that they are purposefully telling their staff to raise the prices of donated items to keep up with the economy. Avery also mentioned prices at grocery stores, such as Walmart, are on the rise as well, making it hard to buy food and stay healthy. She says she knows students who don’t have meal plans that can’t afford as many groceries as before.
“Being a college student who tries to find the best ways to save in order to pay for school seems to get harder and harder,” Avery said. “Cutting corners isn’t as easy as it used to be. The only option now for college students to stay away from debt is scholarships, since trying to buy for less seems to be slipping away from us.”
Cartwright and Watts said that during high times of inflation, it is better to utilize your money instead of letting it sit in your bank account because the longer it sits, the more its value will deplete.
Cartwright recommends researching an app called Acorns, as it is a way to invest in stocks and earn more money alongside your weekly paycheck. Watts also suggests looking at what you are currently paying for, such as subscriptions, and minimizing them. The goal is to only pay for the necessities and save as much as possible.
Those wanting to learn more about what they can do during this time of soaring prices can reach out to Cartwright for more information.