Hyper-Inflation in 2020

Inflation is the process which results in a currency losing its value over time. There are three main factors that contribute to inflation the first being industrial output, the less goods an economy produces the higher the prices of those goods and hence inflation. The second factor is employment the less demand for employment leads to higher worker wages which leads to high product prices and hence inflation. Third and most importantly money supply, the more money in a given economy the more people are willing to pay for a product and therefore the higher the prices of the products so long as the amount of industrial output remains constant or decreases.

Now that we have some general parameters under which inflation could take place let's observe these factors in the United States. For those who don't know, for the government stimulus packages huge amounts of money were introduced into the american economy. Government spending does not cause inflation so long as the spending does not include the introduction of new funds into the economy, meaning the government can redistribute wealth as much as they want without causing inflation so long as they don't print more money. And in this case the US Government instead of reallocating military funds or something like that for the stimulus check huge quantities of money were printed. To be exact 33% of the money in the US was printed in the past year. And though normally this would cause mass inflation because the pandemic has led to a great decrease in the spending of money much of this money has been left idling in bank accounts.  Families have understandably been reluctant to spend because of the insatiable state of the employment of many and this quote explains the reluctance of businesses to raise prices.

“Inflation has been held down by some deep structural factors, including aging demographics and high debt levels — which have restrained aggregate demand and pressures on prices,” Sheets wrote in an email. “Workers have struggled to get higher wages, and firms — competing against the so-called ‘Amazon price’ — have had little capacity to raise their prices.”

But in the and as with everything the future of the US Dollar will be decided by time. And we will have to observe the effects on the economy for the future seeing that the article was reluctant to make any predictions.

Works Cited

Fernando, Janson. “Inflation.” Investopedia, 2021, www.investopedia.com/terms/i/inflation.asp. Accessed 3 Feb. 2021.

Franck, Thomas. “The Ballooning Money Supply May Be the Key to Unlocking Inflation in the U.S.” CNBC, CNBC, 5 Aug. 2020, www.cnbc.com/2020/08/05/the-ballooning-money-supply-may-be-the-key-to-unlocking-inflation-in-the-us.html. Accessed 4 Feb. 2021.

Mutikani, Lucia. “U.S. Producer Prices Rise Moderately; COVID-19 Seen Taming Inflation.” U.S., 11 Dec. 2020, www.reuters.com/article/usa-economy-inflation/u-s-producer-prices-rise-moderately-covid-19-seen-taming-inflation-idUSKBN28L1P1. Accessed 3 Feb. 2021.