It takes a while before changes in the money supply work their way through the financial system and result in inflationary price hikes. And it can take even longer for those price hikes to result in changes in consumer spending. But inflation now has become so deeply entrenched that Americans are starting to change their spending habits.
In a recent survey, over 80% of Americans admitted that rising inflation is causing them to change their actions. Nearly half of Americans are dining out less or spending less when dining out, over 40% are changing the way they shop for groceries, and over 30% are driving less because of the increased cost of gasoline.
If inflation continues to pick up, it’s likely that these number will increase. There’s certainly no sign that inflation will return to low levels anytime soon, and even if this Friday’s CPI release indicates inflation running slightly lower, it could be months before inflation begins to decline to more reasonable levels.
Even more importantly, it’s likely that many of these price increases are here to stay. The days of cheap food and cheap gasoline may be behind us already. And if your income hasn’t adjusted to the reality of higher prices, you may be falling further and further behind.
Americans who have already adjusted to the realities of rising inflation may end up faring better, as their strategies to respond to inflation could result in an increased ability to weather the storm of coming inflation. But unless their wages rise to meet the reality of rising prices, they still risk falling further behind.
It should be readily apparent to all Americans today that inflation is here to stay. If you haven’t already figured out how to react to rising prices, you’re going to have to if you want to stand a chance of maintaining your standard of living. And you had better hope that the Federal Reserve doesn’t screw things up too badly in the future, otherwise you may end up looking back at the present inflation wistfully.