Fluent Essays

this is an example of how to do the paper HOW RISING INFLATION AFFECTS THE ECONOMY Student Paper The question of whether high inflation will result from the economic turmoil brought forth by the lingering pandemic and subsequent near-shutdown of commerce for an extended period is becoming more concerning. Everywhere you look right now, prices are rising: from groceries to housing to the price you pay at the pump, the cost of goods and services have been rising at an alarming rate since the beginning of the year. This article provides insight on how inflation impacts the global economy.   One needn’t be a soothsayer to tell that we are on the precipice of an inflationary period, what with the headlines and latest economic statistics trumpeting that such an event is imminent. Many economists are skeptical of President Biden’s 1.9 trillion dollar stimulus plan, predicting that there will be serious repercussions. However, Janet Yellen, Secretary of the Treasury, keeps trying to assure us that the United States is on watch and well equipped to combat inflation. But we know this to be true; rising costs and higher rates do not come without consequences.   President Biden’s plans and policies have been subjected to scrutiny from myriad economists. They fear that the President’s stimulus initiatives may over stimulate an economy already showing signs of recovery now that vaccines are ticking up and a return to “normalcy” appears to just around the corner. Consumers, sick of a year of lockdown, are raring to get out and consume; to dine out, shop, be entertained, and travel. Businesses are reopening at near-to-full capacity and sporting events are allowing fans in the stands again. Restaurants are phasing out limited occupancy restrictions, and everywhere you look you see what appears to be a pent up and voracious demand for these things.   Manufacturing, on the other hand, has been operating at reduced capacity and, as a result, companies are experiencing supply bottlenecks and are unable to keep up with the growing demand. Consequently, the price for goods and services is increasing. It is Economics 101: Supply vs Demand.   The author chronicles this by providing incidences of inflation, stating that space on container ships is up 180\% over the year prior, and a semiconductor shortage triggered by this years surge in demand for tech equipment – brought on in part by the surge in demand for computer and IT equipment necessitated by a large percentage of the workforce being thrust into finding ways to do its job from home offices – is causing delays in the production of vehicles, computers, and smartphones. He goes on to emphasize that Brent Crude oil prices have risen above sixty dollars a barrel for the first time in over a year after bottoming out below twenty dollars a barrel at this time last year. When inflation rears its ugly head, interests rates rise. In 2011 the European Central Bank erroneously raised rates in response to a temporary spike in inflation, with near disastrous consequences. Greece and Italy’s economies crumbled, threatening to take the global economy with it and they still haven’t recovered. In the article the author explains why this is problematic, as temporary increases in prices embolden fiscal hawks who are often complacent about the dangers of a weak economy.   In America, where increasing inflation expectations and a faster recovery mean price increases are more likely to be persistent, higher inflation could trigger monetary policy gyrations. The   Federal Reserve has vowed to keep interest rates low and will continue purchasing bonds in order to compensate for todays shortfalls. However, the current “average inflation targeting” regime precludes a long-term or significant overshoot. To tamp inflation back down, the central bank will eventually have to increase interest rates. The Author’s main message, which seems self-evident, is that high inflation rates negatively impact the economy and the markets. And while Biden’s ambitious stimulus packages are still needed, especially when it comes to beginning the long overdue process of restoring the nation’s crumbling infrastructure, he must persuade Congress, corporate America and the American public to accept higher taxes to pay for it all – always a difficult and unpopular task – or there will be very real and possibly severe consequences which could lead the nation back into a recession.