The Russian invasion of Ukraine, combined with US sanctions, has caused a significant disruption in the supply chain, resulting in record inflation in many countries throughout Europe, Asia, and North America.
As a consumerist society, the United States appears to be the worst affected. The worst-affected countries are the world’s powerhouses, the United States, India, and China. This section focuses solely on the United States.
According to federal government data released last Friday, inflation in America has reached a 40-year high of 13%, the highest since the Republican Reagan administration in 1980 when it reached 12.5%.
US economists had hoped for a turnaround in the country’s financial health, but they are now reeling after the Biden administration released inflation data showing that inflation has risen at a rate not seen in more than four decades.
Consumer prices increased by 9.1 per cent, while wholesale prices increased by 11.3 per cent. In June of this year, the overall inflation rate jumped to 13% year on year (YOY), with prices for groceries, gas, and other commodities skyrocketing.
The Labor Department reported Friday that this is faster than the 8.3 per cent increase in April.
The price of gasoline, food and other necessities increased in May, putting a large number of American households under severe financial strain as they try to figure out how to manage the family budget while feeding infants (due to a shortage of baby foods), educating teenagers through high school, and enrolling in undergraduate programs at colleges.
The latest statistics have dashed any hope that the worst was over. “So much for the idea that inflation has peaked,” said Greg McBride, chief financial analyst at Bankrate.
“Consumer prices outperformed expectations – and not in a good way, with the annual increase being the fastest in more than 40 years.” Worse, the rises were nearly universal.
“There’s nowhere to hide,” McBride said. With gasoline prices up 50% year on year, rents up 31%, and food prices rising at their fastest rate in more than 41 years during the same period, “any relief for household budgets remains elusive,” according to McBride.
Several European countries, including France, Germany, and the United Kingdom, have been hardest hit.
As a result of US sanctions, gas has become a very expensive commodity, and severe shortages of industrial inputs such as minerals, fertilizers, and others have resulted in severe disruptions in the demand-supply management cycle.
Russia was a major supplier of gas to Europe and even Asian nations such as China and India, which have GDPs of $13 trillion and $32 billion, respectively.
When President Biden gathered Nato allies to push for sanctions against Russia, he hoped that reduced export earnings would force the country out of a financial position to sustain a protracted war with Ukraine and that a discussion across the table would ensure to resolve of the issue.
But, because this is the digital age, Russia had anticipated sanctions and, according to economists, the Putin government had allegedly banked in a new craze of cryptocurrencies in hidden caches around the world to insulate itself.
“The idea of peak inflation assumes that our supply chain disruptions are over and won’t happen again anytime soon,” Nancy Davis, founder of Greenwich, Connecticut-based Quadratic Capital Management, told the New York Post.
Normally, when the central bank intervenes, it only increases interest rates by 25 basis points.
This time it was four doses of 25 basis points in 60 days, which was quite steep, reducing people’s purchasing power to nil.
“The unprecedented easy money policy that the Federal Reserve Bank adopted in response to the economic downturn precipitated by the coronavirus pandemic is driving record levels of inflation,” claims Robert R. Johnson, chairman and CEO of New York City-based Economic Index Associates.
“To put it simply, it is the result of ‘too many dollars chasing too few goods.” “Inflation is now a front-page issue,” says Peter Earle, a research fellow at the American Institute for Economic Research.
With midterm elections scheduled for November this year for all 435 House of Representatives seats in Congress, Republicans are racing to capture the house with planned attacks on the Biden administration for being responsible for high gas and grocery prices, while Democrats are attempting to keep the congress by putting strict gun laws and the restoration of abortion rights on the ballot.
Trump is a wounded tiger, according to popular columnist Douglas Murry, as he faces criticism in the Capitol Hill insurgency probe as evidence mounts against him.
Gambling with a wounded tiger is not a good idea for Republicans, as he is giving the Democrats gift after gift every day. However, the party’s Trumpification has left it with only Trump supporters. Centrists, who had a better chance, were defeated.
Gasoline prices, which were up nearly 60% year on year, drove much of the June price increase. Last month, Americans faced record-high gas prices – $6 per gallon.
The national average was more than $5 per gallon. For the 12 months ending in June, electricity and natural gas prices both increased by 13.7 and 38.4 per cent, respectively.
Year on year, energy prices increased by 41.6 per cent. The inflation rate demonstrates a country’s economic health.
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It is a metric used by a country’s central bank, economists, and government officials to determine whether action is required to maintain the health of the economy.
According to economists, this is the point at which businesses are producing, consumers are spending, and supply and demand are as close to equilibrium as possible.
When inflation is stable, around 2%, the economy is as stable as it can be. Customers buy what businesses sell.
The fate of the US government and Biden’s leadership is jeopardized by the consequences of the Russia-Ukraine war and spiralling inflation.
The sooner it is restrained, the better for the United States and the rest of the world.
