TEHRAN (Iran News) – This week, the U.S. labor department announced an increase in the consumer price index (a basket of products ranging from gasoline and health care to groceries and rents). The CPI has risen to 6.2% compared with the same period last year. The announcement means the country is now facing the highest annual inflation rate in more than 30 years (since November 1990).
Here are the main figures effecting low and middle income American families: Fuel oil prices soared 12.3% for the month, part of a 59.1% increase over the past year.
Energy prices overall rose 4.8% in October and are up 30% for the 12-month period.
Used vehicle prices again were a big contributor, rising 2.5% on the month and 26.4% for the year. New vehicle prices were up 1.4% and 9.8%, respectively.
Food prices also showed a sizeable bounce, up 0.9% and 5.3% respectively. Within the food category, meat, poultry, fish and eggs collectively rose 1.7% for the month and 11.9% year over year.
The Labor Department says wages after inflation fell 0.5% from September to October, the product of a 0.4% increase in average hourly earnings that was more than offset by the Consumer Price Index surge.
Republicans have been quick to attack (repeatedly) President Joe Biden and Democratic lawmakers over the hike in inflation as well as hammering his economic stimulus plans as misguided. Writing on social media, Republican senator for Florida, Marco Rubio lashed out by saying “this will be a winter of high gas prices, shortages and inflation because far left lunatics control our government.”
According to the American multinational independent investment bank, Jefferies Group LLC, fueled by a persistent shortage of available workers, wage pressures will take over as the dominant driver of U.S. inflation in the second half of next year
The bank has reported that it believes “the U.S. is entering the tightest labor market conditions since the 1950s” As a result, wage pressures are not likely to ease any time next year, keeping inflation high even as the supply chain bottlenecks ease.
The U.S. is still six million jobs away from returning to the pre-pandemic employment-to-population ratio, a goal that Jefferies Bank says is “no longer attainable.”
Before President Joe Biden’s virtual meeting with Chinese President Xi Jinping began on Monday, two dozen business groups had called on the Biden White House to remove Trump-era tariffs on China to help ease the historic inflation. In a letter to Biden, the business groups warned tariffs on China and retaliatory levies are hurting U.S. companies and families by raising costs.
U.S. importers have suffered immensely by paying over $110 billion in these tariffs since they began under former President Donald Trump, a trend that continued with $40 billion of that sum paid after Biden came to power.
The letter argued that “these costs, compounded by other inflationary pressures, impose a significant burden on American businesses, farmers and families trying to recover from the effects of the pandemic.”
The business groups noted that the U.S. Treasury Secretary acknowledged the easing of trade tensions can help the suffering economy saying “we agree with Secretary Yellen’s recent comments that tariffs tend to increase domestic prices and raise costs to consumers and businesses due to higher cost inputs and that lowering the U.S. and Chinese tariffs could help ease inflation.”
Some financial observers say one of the main reasons for the rise in prices are constraints in commodities with the most demand for consumers, suffering disruptions in the supply chain. The chairman of the American Federal Reserve, Jerome Powell, has echoed that argument. time will tell if that is the source of the problem.
Other economists believe there is a much more sinister reason for the current inflation, a situation that appears to be getting seriously worse by the day and something that falls into the hands of a relatively few business giants who enjoy the economic power to raise prices at their own will.
The argument that these economic experts make is if the markets had been more competitive, then companies would have kept their product prices as low as possible to avoid their competitors from taking customers away.
However, that doesn’t appear to be the case anymore in America.
Corporate giants are raising prices instead of dropping them despite revenues showing they are actually making record profits. It signals the extent of the power they enjoy in the market that these massive companies are able to increase their prices after all the turmoil and economic damage caused by the pandemic to the American people (the record number of unemployment levels, the stimulates packages passed etc.) In fact, these large companies have so much market power that they are able raise prices carte blanche.
With that much freedom to operate with impunity; then analysts would probably say the underlying problem isn’t so much to do with rising inflation but rather more to do with not much competition out there for large corporations. Despite that, it has not prevented the very same businesses from using inflation as a pretext and an excuse to raise their prices. And that is something critics would describe as unbelievable greed.
Some companies have announced they will start charging more by claiming they need to increase their own purchasing prices because they too are enduring hefty costs to manufacture a product. However, a deeper look into the same companies’ financial books tells us they have been making extremely large amounts of profit before and after inflation rose.
There is a similar trend in the energy markets where demand is growing but supply is not. There isn’t that much competition so energy firms have allowed supply to be kept low while prices kept high. In essence, the few energy firms who run the industry can even coordinate among themselves. The same can be said about pharmaceutical companies or airlines.
Ordinary people are the biggest losers. The wealth gap in America is shocking to say the least. Here are some facts: By the start of this year, the richest one percent of Americans held 32% of the entire nation’s wealth, the highest level since records began in 1989. Meanwhile, the bottom 50% held just two percent of the nation’s wealth. Since the start of 2020, the richest 1% gained a whopping $10 trillion. Last year. U.S. billionaires owned nearly $4 trillion, that is approximately 3.5% of all privately held household wealth in the country. Billionaire wealth was twice the amount of wealth held by the bottom 50% of U.S. households combined, that is around 160 million Americans. The Federal Reserve estimates that the amount of privately held wealth in the U.S. stood at $112 trillion.
Meanwhile, the Biden administration has been negotiating with the oil industry in an effort keep American households warm this winter. This week, Biden himself acknowledged In a statement that “inflation hurts Americans’ pocketbooks, and reversing this trend is a top priority for me.’’
But these talks will be political survival tactics as there are major concerns already facing the current U.S. administration, so early into its four year term in office.
The President’s popularity has not only dropped but nosedived dramatically and the midterm elections are not too far away. Typically, American political parties tend to perform badly in their first term (in the midterm elections) as all their leader’s election trail promises that got their President into the Oval Office never actually materialize. Voters quickly realize they have fallen for the same trick again. The level of that voter disappointment will be assessed by just how much of the U.S. House of Representatives and the Senate the democrats can retain next year.
