Mark Twain said: “Truth is stranger than fiction, but it is because Fiction is obliged to stick to possibilities; Truth isn’t.” As the world currently confronts surging inflation, here’s a fact that is hard to believe it’s not fictional. The hyperinflation of Hungary a year after World War II still holds the record for the most extreme monthly inflation rate ever—41.9 quadrillion percent for July 1946. To fully understand what happened, prices in Hungary were doubling every 15 hours for the whole month.
As Covid lockdowns end and countries start easing restrictions, the sudden spike in demand has thrown the global supply chain into chaos. As a result, businesses and consumers have no choice but to suffer the squeeze of a global supply chain under duress. All over the world, prices surged for everything from gasoline to meat and other products, which put great financial weight on families still struggling with the economic fallout from the pandemic.
In the US, consumer prices jumped 6.8 percent in November over the past year, the highest such inflation rate in 39 years. Americans were shocked that the largest cost spikes have been for such necessities as gasoline, food, energy, housing, clothing and cars. These are goods and services that millions of Americans regularly depend upon in their daily lives.
DeanSevin Yeltekin of the William E. Simon Graduate School of Business Administration said the pandemic has created an environment ripe for inflation: “We are witnessing a massive release of pent-up demand as retailers open their doors and airlines resume normal flight routes once again. It might seem counterintuitive that Americans are emerging from a pandemic with enough money in their pockets to demand more goods and services than producers can supply in the short-term, but there are a few unique factors at play. An extended period of lockdown, without access to restaurants, entertainment venues, and other common spending hotspots, has forced many people to increase their savings, even if they did offset a portion of these savings with the occasional online shopping splurge. According to Bureau of Economic Analysis and Barron’s, Americans have saved an extra $2.4 trillion since the pandemic hit.”
In the Philippines, cheaper food items pushed the country’s average inflation rate down in November compared to the previous month, according to the Philippine Statistics Authority.The PSA said inflation slowed to 4.2 percent in November 2021 compared to the 4.6 percent posted in October 2021. This was mainly due to the decline in prices of vegetables and fish. However, the rate is higher compared to the 3.3 percent posted in November 2020. It is also above the government’s inflation target of 2 to 4 percent this year (Read, Cheaper food slows inflation in November, in the BusinessMirror, December 7, 2021).
“Pork prices continuously went down month-on-month from July to early-October. This means that our policy to temporarily import pork has been effective. However, the uptick in prices in November shows that we need to further ease administrative requirements for the unloading and distribution of stocks to encourage more importation and help bring back pork prices to their pre-African Swine Fever level,” Socioeconomic Planning Secretary Karl Kendrick T. Chua said.
Inflation is often referred to as the “worst tax” because its effects go unnoticed by most people.In reality, it is eroding paychecks. An increase in inflation rate means we have to spend more for the same goods that we used to buy at a lower cost. For some people, this means a lower standard of living. If inflation surges too high, the economy can suffer. The inflation we’re witnessing in the country does not yet justify flat out panic, but it does merit careful scrutiny. With Christmas approaching, authorities need to act to ease the pain of soaring prices amid the pandemic. The big challenge facing our Central Bank officials and economic managers is taming the inflation rate to help create more jobs. If more consumers have more money to buy goods and services, the Philippine economy benefits and grows.