My Side of the Fencepost — Real Inflation

By Jim Dickerson – Feb. 2, 2022
We’re hearing about inflation quite often these days, but are we hearing the “real” story?
It’s more likely that we’re feeling real inflation rather than depending on numbers from the federal government.
The government line never quite matches what is actually going on in many sectors of our economy.
On Monday, I received an email from one of our paper suppliers. The supplier had just received notice of upcoming price increases from a couple of their manufacturers, announcing price increases for commodity office paper.
The net impact, they said, would be a $1.50 increase per carton on Feb. 4, and another $2.50 increase per carton in March.
“Hold on a minute,” I said. “Paper just went up again in the last half of January.”
“That’s just the word we’re getting for the coming months,” said our salesman.
We’ve been getting that word quite a lot in the past seven months, and that has made it very difficult to do business.
I asked the salesman to compute the percentage increase in commodity paper just since last summer.
He said: “It looks like it’s gone up 33 percent just from June 21, 2021 to Feb. 1, 2022.”
Wow! That’s even worse than I thought. So much for a little “temporary” inflation while we get things back on track after the latest COVID-19 spike. This is really getting serious, and — it’s more serious for small businesses that don’t have large stockpiles of products or raw materials that were purchased at lower prices.
We’re certainly not the only type of business experiencing this “off the charts” inflation. I know it’s also happening in lumber and hardware, housing, used cars, wholesale food and much more.

Part of this is due to delays in the supply chain, but certainly not all. To quote a recent story from Bloomberg: “High inflation has proven more stubborn and widespread than the central bank predicted amid unprecedented demand for goods along with capacity constraints related to the supply of both labor and materials.”
Or, to quote a December article in the Wall Street Journal: “Prices rise when goods become scarce or the money supply expands rapidly.” That’s just a basic economic rule, and both are taking place right now.
There was yet another interesting statement in that Wall Street Journal story: “The Federal Reserve has increased the money supply more than 40 percent in the past two years alone.”
That one needs to soak in a bit. It’s a new record. U.S. money supply has never before risen at this level. It’s a little higher estimate than many economists were warning about (22 to 31 percent) early last year, and it has happened on the watches of both President Trump and President Biden.
Is it inflationary?
You bet.

At the end of 2021, the Consumer Price Index (mostly used as the official inflation gauge) was pegged at seven percent for the previous 12 months. I believe the inflation rate was actually growing much more than the CPI reflected in the last several months of 2021.
There has been talk that the Federal Reserve would begin raising interest rates in March by one-quarter of one percent.
I’m guessing that will happen, but I doubt it will be enough to put much of a dent in real inflation.
I’m not an expert on managing the economy, but I believe I understand when things are out of kilter, and they are definitely out of kilter right now.
Wage earners, retirees and small businesses across the country are the ones who will feel the real impact of all this.