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Americans complain about the inflation that they are at least partly responsible for.

By Curt_Anderson
November 26, 2021 11:37 am
Category: Business

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Cost-push Inflation
When worker wages increase production costs increase thus the price to the consumer increases. Of course, if consumers are unwilling or unable to pay the higher prices, the producer goes out of business and/or the employees won't get wage increases.

Demand-pull Inflation
When demand is high, prices increase. When consumers have money in the bank they have the ability to pay for things.

There is currently pent-up demand; in other words consumer willingness to spend their money. Postponed vacations and holiday travel due to Covid are happening this year. Restaurants and other businesses are seeing customers who for the last 18 months avoided them like (and because of) the plague.

The New York Times reports that "workers have seized the upper hand in the labor market, attaining the largest raises in decades and quitting their jobs at record rates. The unemployment rate is 4.6 percent and has been falling rapidly.

Cumulatively, Americans are sitting on piles of cash; they have accumulated $2.3 trillion more in savings in the last 19 months than would have been expected in the prepandemic path. The median household’s checking account balance was 50 percent higher in July of this year than in 2019, according to the JPMorgan Chase Institute."

Supply chain problems are also the result of consumer behavior. During the height of the pandemic, consumer demand dropped, thus manufacturers reacted by producing less. Now that demand is up, manufacturers and transporters throughout the world are struggling the fulfill consumer demand.

Manufacturers in the last decades have adapted a Just In Time manufacturing strategy which lowers costs but is not particularly resilient to fluctuating consumer demand. Also complicating matters is the fact that employees became sick or dead because of Covid. Of course, many employees didn't want to work in place where they were likely to be infected with Covid.


Cited and related links:

  1. nytimes.com
  2. fool.com

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Comments on "Americans complain about the inflation that they are at least partly responsible for.":

  1. by Donna on November 26, 2021 11:44 am
    It'll all eventually balance out. In the meantime, Biden will bear the brunt of the blame.


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