The consumer price index for all items changed in the USA by 7.5% from the previous year. This is the highest change since the 1980s. One may overestimate the importance of this jump in prices for the economy. The situation in the 1970s and 1980s is quite different from the current one, however. The historical inflation was driven by economic factors - dramatic growth in the labor force associated with the growth in the labor force participation rate for women. This process ended when nearly 90% of women joined the labor force in the early 1980s compared to less than 50% in the 1960s. The current situation with the labor force is the opposite (the participation rate has been decreasing since the late 1990s) and the real economic forces suggest deflationary processes.
Money printing is the reason for the observed price increase in the USA. This time the money was delivered directly to people and businesses unlike during the period between 2008 and 2020. Essentially, the same volume of goods and services was matched by a larger amount of money. As a result, the price increased by the printed amount as was shown in my previous posts. This effect is monetary but has no economic reasons behind it. The price can increase only once without further money printing. Moreover, the increased amount of money was paid once and cannot be repeated. The price jump was a one-off event and related inflation is transient. Therefore, there are two reasons for the prices to plummet - monetary and economic. Some kind of idea storm ...
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