Why inflation hurts more than it did 30 years ago

 Inflation spooked the nation in the early 1980s. It surged and kept rising until it topped 13 percent.

These days, inflation is much lower. Yet to many Americans, it feels worse now. And for a good reason: Their income has been even flatter than inflation.

Back in the ‘80’s, the money people made typically more than made up for high inflation. In 1981, banks would pay nearly 16 percent on a six-month CD. And workers typically got pay raises to match their higher living costs.

No more.

Over the 12 months that ended in February, consumer prices increased just 2.1 percent. Yet wages for many people have risen even less — if they’re not actually frozen.

Social Security recipients have gone two straight years with no increase in benefits. Money market rates? You need a magnifying glass to find them.

That’s why even moderate inflation hurts more now. And it’s why if food and gas prices lift inflation even slightly above current rates, consumer spending could weaken and slow the economy.

Consumer inflation did pick up in February, rising 0.5 percent, because of costlier food and gas. Still, looked at over the past 12 months, price increases have remained low. Problem is, these days any inflation tends to hurt.

Not that everyone has been squeezed the same. It depends on personal circumstances. Some families with low expenses or generous pay increases have been little affected.

Others who are heavy users of items whose prices have jumped — tuition, medical care, gasoline — have been hurt badly. But almost everyone is being pinched because nationally, income has stagnated.

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This article is an interesting acknowledgement of the current monetary and economic paradigm most Americans are being forced to live with; yet, it is still very flawed and merely a superficial skim through the real issue of inflation, its causes, and the potential cures. The real issue is that inflation is a monetary phenomenon and price inflation is its consequence. Since 2002, the Fed has been engaged full throttle into pumping " liquidities" into the financial sector in order to create an artificial economic plateau of growth. This flawed paradigm goes against the basic rule for economic growth based on savings and entrepreneurial value creation through time. While the monetary distribution by the Fed has benefited a certain segment of the financial sector, most people today are forced to deal with the effects of our leveraged financial and economic sectors: Higher prices! 

Price inflation is caused by central banking money printing! If we force the central bank to stop their evil schemes, the zombie financial institutions will go bankrupt and many other corporations will follow. A steep depression will ensue and a lot of pain will be spread; but in a short time span, the dollar will strengthen, higher interest rate will encourage savings, and capital will be redirected into productive assets. THERE WILL BE A LOT OF PAIN, but in a couple of years or more, the economy shall be revived and growth, real productive value adding growth created. 

Consequently, we can waver around and compare the pains of today against the pains of yesterday or, we can seek to understand the fundamental causes of today's woes and engage in fixing those issues. It will not be easy; Americans and many people around the world have been brainwashed into believing that spending was the mean of wealth creation. It will require a systematic paradigm shift and the destruction of the consumption based economic growth " model" aka Keynesianism.