Why has inflation hit the US more than Europe?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Farmers in the EU are heavily subsidized so the price of actual groceries are cheaper. Also, salaries are lower so restaurant prices are lower. Add to that a very favorable exchange rate for the U.S. and it can seem cheap to us. But compared to European salaries, it’s not cheap.

This. Europeans are relatively poor. Mississippi has a higher gdp per capita than all but a handful of European countries and the gdp per capita for the UK is roughly the same as Mississippi (the poorest US state).

Interesting. I had to look that up and compared the different countries of Europe to Mississippi. I had no idea.

When considering purchasing power parity and inequality, median UK is 20% richer than median Mississippi.

https://www.forbes.com/sites/amesbrown/2018/04/03/tax-reform-college-endowments/?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Farmers in the EU are heavily subsidized so the price of actual groceries are cheaper. Also, salaries are lower so restaurant prices are lower. Add to that a very favorable exchange rate for the U.S. and it can seem cheap to us. But compared to European salaries, it’s not cheap.

This. Europeans are relatively poor. Mississippi has a higher gdp per capita than all but a handful of European countries and the gdp per capita for the UK is roughly the same as Mississippi (the poorest US state).

Interesting. I had to look that up and compared the different countries of Europe to Mississippi. I had no idea.

When considering purchasing power parity and inequality, median UK is 20% richer than median Mississippi.

https://www.forbes.com/sites/amesbrown/2018/04/03/tax-reform-college-endowments/?

I don’t think tax reform for college endowments is the reasons though, no?

[Anonymous]

Anonymous wrote:

Anonymous wrote:American corporate greed and shareholder expectations, with low government regulation.

Companies took the Covid excuse to raise prices as much as they could get away with without decreasing demand for their product.
Also once the few top companies started cutting their workforce 10%, almost all the Fortune 500 companies took the opportunity to do the same.
Result- record corporate profits and stock market performance for last 3 years

Corporate profits have not outpaced actual inflation. The value of the money is dropping rapidly due to inflating the money supply since 2008. If corporate profits weren’t “up” then profits would be in the toilet adjusted for inflation.

Plus, the "record for the last three years" thing conveniently avoids the fact that corporate profits were mostly very low four years ago. What has happened is that corporate profits have recovered to where they were before, adjusted for inflation.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:American corporate greed and shareholder expectations, with low government regulation.

Companies took the Covid excuse to raise prices as much as they could get away with without decreasing demand for their product.
Also once the few top companies started cutting their workforce 10%, almost all the Fortune 500 companies took the opportunity to do the same.
Result- record corporate profits and stock market performance for last 3 years

Corporate profits have not outpaced actual inflation. The value of the money is dropping rapidly due to inflating the money supply since 2008. If corporate profits weren’t “up” then profits would be in the toilet adjusted for inflation.

Plus, the "record for the last three years" thing conveniently avoids the fact that corporate profits were mostly very low four years ago. What has happened is that corporate profits have recovered to where they were before, adjusted for inflation.

Not evenly across industries. I worked for a global corporate food company for 15 years. We can take more pricing in the U.S. due to less competition and regulation than in Europe. We were able to keep prices initially increased for supply chain issues high well after the problems were resolved and reap profits for the past 3 years. We had record profits and bonuses. Now demand has finally tanked and we will lay off employees to meet shareholder expectations. Europe also has harder labor laws that prohibit this. Money supply that kept rates low since the last recession and US stimulus helped feed the demand despite prices. If the U.S. had raised rates at the end of Obama or during Trump, govt stimulus wouldn't have been our only lever during covid.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Farmers in the EU are heavily subsidized so the price of actual groceries are cheaper. Also, salaries are lower so restaurant prices are lower. Add to that a very favorable exchange rate for the U.S. and it can seem cheap to us. But compared to European salaries, it’s not cheap.

This. Europeans are relatively poor. Mississippi has a higher gdp per capita than all but a handful of European countries and the gdp per capita for the UK is roughly the same as Mississippi (the poorest US state).

Interesting. I had to look that up and compared the different countries of Europe to Mississippi. I had no idea.

When considering purchasing power parity and inequality, median UK is 20% richer than median Mississippi.

https://www.forbes.com/sites/amesbrown/2018/04/03/tax-reform-college-endowments/?

This is a poor analysis that the British use. If you adjust for PPP, you can’t use the US PPP and should use the Mississippi PPP. When you do that, Mississippi is ahead again.

[Anonymous]

I don't think people account for cultural biases when considering living standards. It's not just a numbers game but also lifestyle. Europeans don't have to eat a lot of processed foods to really enjoy their food. So they don't need 20 different cereals and can be happy with 3-4 brands if not 1-2. So costs of dining right there is apples to oranges. They don't have to worry about health insurance, children's prek and such. So what you save in fixed costs come into play for standard of living. Personally if I'm poorer in a small town in France v MS, I'd still prefer to be in France because at least my overall expenses are less than needing x amount to live a certain lifestyle in MS. It's not just daily food and mortgage to consider.

[Anonymous]

Our houses are just huge here:

[Anonymous]

Anonymous wrote:I don't think people account for cultural biases when considering living standards. It's not just a numbers game but also lifestyle. Europeans don't have to eat a lot of processed foods to really enjoy their food. So they don't need 20 different cereals and can be happy with 3-4 brands if not 1-2. So costs of dining right there is apples to oranges. They don't have to worry about health insurance, children's prek and such. So what you save in fixed costs come into play for standard of living. Personally if I'm poorer in a small town in France v MS, I'd still prefer to be in France because at least my overall expenses are less than needing x amount to live a certain lifestyle in MS. It's not just daily food and mortgage to consider.

Yes, things are perfect in France. That's why Macron's snap elections went terribly. And people certainly loved the Soviet Republics, where they only had one cereal option. Your fantasy does not match reality.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Important to point out that a massive driver of EU inflation was the Ukraine war and huge energy costs. In contrast, the US actually benefited from the war.

Economically? How so?

By selling massive amounts of energy and weapons to Europeans.

The driver of EU inflation was a major spike in energy costs due to EU inflation. In contrast, the US is a net energy producer, so not only did the war not impact prices here but it weakened our competitors such as German manufacturers.

[Anonymous]

Anonymous wrote:We visited Italy, France and Monaco this summer and I was surprised that the prices overall were significantly less than the US.

Hotel rooms are definitely cheaper, the cost of food is significantly cheaper : a good croissant in Paris is 1.20 euros vs $5-$6 here at a comparable bakery. A scoop of icecream in Venice and Monaco is 3 euros vs $6-$7 here.
Restaurant food is almost half the price in Europe when you account for taxes and tips in the US ( not to mention you get better tasting food there).

I get the Covid stimulus packages passed in the US contribute to inflation but many European countries also passed those.

Why has inflation hit the US much harder?

Europe didn't engage in massive, unprecedented fiscal deficits in 2021, 2022, 2023 and 2024.

(They closed the 2020 spigot; we chose to enlarge it)

[Anonymous]

Anonymous wrote:I don't think people account for cultural biases when considering living standards. It's not just a numbers game but also lifestyle. Europeans don't have to eat a lot of processed foods to really enjoy their food. So they don't need 20 different cereals and can be happy with 3-4 brands if not 1-2. So costs of dining right there is apples to oranges. They don't have to worry about health insurance, children's prek and such. So what you save in fixed costs come into play for standard of living. Personally if I'm poorer in a small town in France v MS, I'd still prefer to be in France because at least my overall expenses are less than needing x amount to live a certain lifestyle in MS. It's not just daily food and mortgage to consider.

Americans tend to overestimate social benefits in European countries. Even friends in Northern European countries deal with expenses and challenges with childcare, parental leave etc.

For example there isn’t a country in the world with parental leave without a cap. That cap is often very low, such as $250 a week. This extremely generous parental leave that Americans are so envious of is often a little over $1k a month. Hardly enough to live off of in an expensive European city. Yes, it’s better than having to quit your job but European countries have horrible labor markets and it’s not easy to enter and exit jobs like it is here.

My European friends might not pay high childcare costs but they talk about energy bills which is something I have never heard discussed socially here in the US. They also deal with higher transportation costs, gasoline prices and consumer goods being more expensive than here. On top of this their salaries are much lower.

Every statistic shows that someone living in France or the UK has less disposable income than the average American. On top of that they have smaller homes and fewer cars. It makes sense they have less money. What do they produce or innovate and how much do they work? Far less than Americans.

[Anonymous]

Anonymous wrote:Our houses are just huge here:

And their energy costs are insane for their tiny expensive homes.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I don't think people account for cultural biases when considering living standards. It's not just a numbers game but also lifestyle. Europeans don't have to eat a lot of processed foods to really enjoy their food. So they don't need 20 different cereals and can be happy with 3-4 brands if not 1-2. So costs of dining right there is apples to oranges. They don't have to worry about health insurance, children's prek and such. So what you save in fixed costs come into play for standard of living. Personally if I'm poorer in a small town in France v MS, I'd still prefer to be in France because at least my overall expenses are less than needing x amount to live a certain lifestyle in MS. It's not just daily food and mortgage to consider.

Americans tend to overestimate social benefits in European countries. Even friends in Northern European countries deal with expenses and challenges with childcare, parental leave etc.

For example there isn’t a country in the world with parental leave without a cap. That cap is often very low, such as $250 a week. This extremely generous parental leave that Americans are so envious of is often a little over $1k a month. Hardly enough to live off of in an expensive European city. Yes, it’s better than having to quit your job but European countries have horrible labor markets and it’s not easy to enter and exit jobs like it is here.

My European friends might not pay high childcare costs but they talk about energy bills which is something I have never heard discussed socially here in the US. They also deal with higher transportation costs, gasoline prices and consumer goods being more expensive than here. On top of this their salaries are much lower.

Every statistic shows that someone living in France or the UK has less disposable income than the average American. On top of that they have smaller homes and fewer cars. It makes sense they have less money. What do they produce or innovate and how much do they work? Far less than Americans.

Very good points there.

Americans also don't appreciate how differently taxes work. In Europe everyone making say $30K or more has to pay income tax, often 15% at the very least, whereas in the US close to 50% of adults pay NO federal income tax (or they actually get a "refund" for what they didn't pay). In Europe you have to pay a 21% VAT tax on every good, every service you purchase.

Europeans do tend to do well because they are extremely frugal by US standards, and sure they are also aided by social benefits and by family support, but I agree with PP above that things are less rosy than what many Americans assume.

[Anonymous]

Because the dollar is too strong.

https://www.nbclosangeles.com/news/business/money-report/inflation-has-led-to-a-strong-u-s-dollar-but-thats-not-always-a-good-thing/3492592/#:~:text=A%20strong%20U.S.%20dollar%20increases,reduced%20demand%20for%20U.S.%20exports.

A strong U.S. dollar increases Americans' purchasing power abroad but can lead to economic consequences such as job losses in key industries domestically.
The Federal Reserve's interest rate hikes contribute to the dollar's strength, but this can spur higher prices at home and reduced demand for U.S. exports.

[Anonymous]

With all sincerity, if folks really prefer Europe then feel free to live there instead of here.

I went to school in Europe not so long ago. I had some happy times there, but after running the numbers my conclusion was I could not afford to live there.