How inflation is eating away at everything | Notice
I had the brilliant idea of giving my wife a bicycle for her birthday. Nothing fancy, mind you, just a comfortable touring bike. I had visions of us cycling leisurely to a nearby lake on a hot summer day, with sandwiches neatly stored in a picnic basket and Vivaldi’s “Summer” from the “Four Seasons,” playing mysteriously, but relaxing, in the background.
Until I walk into a neighborhood bike store, that is, I come face to face with the reality of the semi-post-COVID-19 economy of 2021 (semi, because that the pandemic is not yet really over).
First, the store – a well-known local chain with a staff of garnish associations whose bulging leg muscles were testament to their expertise – was nearly empty. Its inventory consisted of a few dozen inexpensive children’s bikes and, at the other extreme, an even smaller supply of high-end racing bikes selling for up to $ 12,000. It’s hard to find bikes these days, said an associate with a wry smile.
Second, I found myself facing the silent scourge of inflation and supply shortages – the one that the Biden administration insists is just a temporary adjustment to pent-up pandemic demand.
A salesperson told me he knew exactly the type of bike I was looking for. He even surprised himself to find one in another store somewhere along the Wasatch Front. He could have it sent to his store and keep it for me.
But there was a catch. I could pay the full price of the bike right away, without seeing it, or I could decide to wait to see it, first. But if I waited even a day to pay, the cost of the bike would go up by $ 50. This was on orders from the manufacturer, who was raising prices to reflect rising material costs and declining demand for their supply.
Real estate isn’t the only market forcing consumers to make split-second decisions as they compete with a host of eager buyers. The most recent figures from the US Department of Labor showed that the consumer price index jumped 5% in May from the previous year, which was the highest rate of inflation in 13 years . The department’s basic price index, which does not include food and energy, rose 3.8%. It was the highest jump in 29 years.
the The Wall Street Journal editorial page put it in more practical terms. For a year this time, the price of a used car has jumped by 29.7%, plane tickets by 24.1%, jewelry by 14.7% more, shoes by 7.1. % and, yes, bikes by 10.1%.
And, since I mentioned real estate, the cost of a new home is $ 36,000 higher because of the price of lumber alone. Supply and demand prevail from there. The real estate website Zillow.com shows that the typical mid-level home in Salt Lake County is currently valued at $ 493,764, which is an astonishing 20.6% increase over last year.
The Journal notes that all federal bailouts, forgivable loans and taxpayer checks have increased money supply by 31% since the end of 2019, while federal spending has jumped 50%, “distorting signals from price and capital allocation ”.
The administration says this is only a temporary adjustment. The Federal Reserve says it’s “transient”. And don’t worry, it has tools to use if inflation gets out of hand. I know you are relieved to hear this.
Some economists agree, noting that inflation appears to be affecting items most disrupted by the pandemic, such as tourism or luxury items.
But I have a few questions. If it’s temporary, does that mean prices will eventually drop again? Wouldn’t that be just as disruptive, especially for things like real estate, where people often borrow money for their purchases? And what about the impact of inflation on wages? Doesn’t every price increase, whether it’s at the grocery store, gas station, or bike store, mean that my earning power is dwindling right now? When does it work out?
My cycling story has a happy ending. I prepaid and although I had to spoil the surprise by taking my wife to the store to try it, she loved it. The seller said he would have refunded my money if it had been different.
Of course, that just means that I should have looked for a gift elsewhere, the price of which would have increased while I procrastinated on a bike.
Jay Evensen is a columnist for the Deseret News