An expert economist warned that the United States’ inflation crisis is about to enter a new stage and the economy will become even more precarious.
Inflation is already at a 40-year record-high, according to the Department of Labor‘s Consumer Price Index for May. Secretary of the Treasury Janet Yellen is already warning that high inflation is likely to stick with consumers for the rest of the year. This will be combined with a slowdown in American economic activity.
Ross McKitrick, a professor of economics at the University of Guelph in Ontario, Canada, noted that inflation usually comes in several stages – and the next one will make life much worse for everyday Americans. (Related: Expert economist: High inflation could have been avoided if Federal Reserve acted earlier.)
The first stage, according to McKitrick, happens when more and more newly printed money enters the economy.
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“It’s at that first stage where you have the money illusion, which means people think they have more money than they do,” said McKitrick, noting that this leads to people spending more. This flood of new money into the market creates a very brief boom in the economy.
“But they don’t actually have more money than when they started,” he added. “What they have is a dilution of the money supply.”
The second stage is when this economic boom slows down and prices start going up due to the increased demand generated by the first stage. People begin to hope that the inflationary period is only short-term.
“People can cope with a lot of things temporarily. If you think, ‘Okay, the price of gas jumped and it will be high for a month or two, and then it will go back to normal,’ nobody’s going to change their behavior in response to that,” said McKitrick.
This, McKitrick noted, is the stage America is currently at. People are starting to relax their previous spending habits, but inflation is still on the rise.
Third stage of inflation to come with massive labor unrest
The third stage occurs when labor markets start adjusting to the new reality. Workers effectively take a massive pay cut due to inflation. This will cause a lot of discomfort among workers, who will start going to their employers demanding relief in the form of higher wages.
Bosses, in turn, will resist demands for higher wages by pointing out that their operating costs have also gone up and their budgets can’t afford to provide higher wages for their workers even if they wanted to.
“And both sides in effect have a genuine case to make that this is not new money, these are not larger profit margins – workers have lost purchasing power.”
As both workers and employers remain at this impasse, workers and unions will start threatening their bosses with strike actions and take very tough stances during bargaining efforts.
“If that kind of ‘wage settlement process’ gets calibrated to the inflation rate, then that becomes a new driver of price increases,” said McKitrick. He called this phenomenon a “wage-price spiral,” and it is similar to what happened during America’s inflation crisis during the 1970s.
If people keep expecting inflation to go up and are able to get pay raises out of their bosses to keep up with the inflation rate, then the inflation crisis won’t actually end. Payroll costs will keep getting taken into account when calculating the final price of products.
“You never get rid of inflation as long as people expect inflation to be there,” said McKitrick.
Learn more about inflation in the United States at Inflation.news.
Watch this episode of “The American Journal” by InfoWars as host Harrison Smith talks about how the economy is collapsing.
This video is from the InfoWars channel on Brighteon.com.
More related articles:
- Yellen proposes temporary federal gas tax “holiday” to combat inflation (why not make it PERMANENT?).
- ANOTHER economic blow: Fed enacts largest rate increase since 1994, markets respond by collapsing further amid worsening ‘Bidenflation.’
- INFLATION REPORT: Wholesale prices rose 10.8 percent over the past year.
- Surveys: Consumers are saving less and acquiring more debts due to inflation.
- Wall Street analysts: Fed to hike interest rates more aggressively in bid to address soaring inflation.
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Will America-First News Outlets Make it to 2023?
Things are looking grim for conservative and populist news sites.
There’s something happening behind the scenes at several popular conservative news outlets. 2021 was bad, but 2022 is proving to be disastrous for news sites that aren’t “playing ball” with the corporate media narrative. It’s being said that advertisers are cracking down, forcing some of the biggest ad networks like Google and Yahoo to pull their inventory from conservative outlets. This has had two major effects. First, it has cooled most conservative outlets from discussing “taboo” topics like Pandemic Panic Theater, voter fraud, or The Great Reset. Second, it has isolated those ad networks that aren’t playing ball.
Certain topics are anathema for most ad networks. Speaking out against vaccines or vaccine mandates is a certain path to being demonetized. Highlighting voter fraud in the 2020 and future elections is another instant advertising death penalty. Throw in truthful stories about climate change hysteria, Critical Race Theory, and the border crisis and it’s easy to understand how difficult it is for America-First news outlets to spread the facts, share conservative opinions, and still pay the bills.
Without naming names, I have been told of several news outlets who have been forced to either consolidate with larger organizations or who have backed down on covering certain topics out of fear of being “canceled” by the ad networks. I get it. This is a business for many of us and it’s not very profitable. Those of us who do this for a living are often barely squeaking by, so loss of additional revenue can often mean being forced to make cuts. That means not being able to cover the topics properly. Its a Catch-22: Tell the truth and lose the money necessary to keep telling the truth, or avoid the truth and make enough money to survive. Those who have chosen survival simply aren’t able to spread the truth properly.
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