Inflation: The New 'Recession'
Ever since the Great Recession ended back in July 2009, economists began to play down the dreaded R-word and got us to fear another financial buzzword that’s just as ominous: inflation. Economists will often cite from the same handful of factors that could sharply drive prices up and cause rapid inflation to take root. Some note the rising cost of commodities like oil – something that is particularly true now with the protests in the Middle East - could drive up the prices on many consumer goods. Others speculate that the government’s efforts to stimulate the economy may have the unintended consequence of ratcheting up costs. Still others fear the possibility of the declining value of the dollar due to the unstable economy, which could make U.S. imports from countries like China more expensive. If inflation takes hold as a result of any or all of these factors, it not only could make it all the more expensive to purchase a home or car, but it also could undermine one’s long-term savings plans and even the value of Social Security, which does not offer cost of living increases at the moment. Yet, all the panic about inflation has obscured the fact that many products in the U.S. are actually getting cheaper, at least for now. Photo Credit: Paolo Camera