Reply to Can someone explain to me why we have such high inflation now?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous]A lot of these answers aren't contextualizing it in the fact that there is high global inflation. The US is in line with what everyone is experiencing so tying it just to US policies doesn't make sense.[/quote]

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Anybody who cites CAA, CARES Act, PPP loans, etc, as a reason for inflation in the United States is a partisan hack, woefully underinformed, or both. CAA, CARES, PPP et al are making inflation in the United States run marginally hotter, but they're not the proximate cause. Countries that were stingier with fiscal and monetary stimulus are still experiencing decades-high inflation rates; the UK, for instance, spent about half as much on fiscal stimulus relative to GDP as we did, and yet their inflation rate is higher than ours.

The current state of global inflation is disproportionately caused by supply-side issues; the well-publicized supply chain woes, disruptions in the energy market, etc.[/quote]

https://www.forbes.com/advisor/personal-finance/inflation-by-country/

Kristina Hooper, chief global market strategist at Invesco, references two textbook examples why inflation is currently high: demand-pull inflation and cost-push inflation.

Demand-pull inflation occurs when prices increase due to increased demand, she explains. Demand-pull inflation can be driven by increased government spending (for instance, providing stimulus checks).

If consumers expect higher prices in the future, they’re more likely to buy today—and that becomes a self-fulfilling prophecy when it comes to inflation expectation, according to Hooper.

The other type of inflation we’re seeing, cost-push inflation, leads to price increases when the supply of goods and services is disrupted. High prices for oil and natural gas are good examples here.

The global pandemic had a great deal to do with rising inflation, Hooper explains. “We turned off [the] economy, and then we turned it back on,” she says.

When the economy started growing again, many countries faced similar challenges with labor sourcing and supply chain disruptions. “That contributed to scarcity of supply just as demand increased,” Hooper notes.[/quote]

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