We’re thrilled to welcome guest blogger, Jerry Bowyer, this week as he discusses the significant disruption inflation is causing to our economy. Jerry is a financial economist and a luminary within the field, and we look forward to welcoming him as one of our speakers at Convene 2022.
As you read this article, take note of this moment for leaders to approach their employees with expansive generosity as much as they are able. Inflation rose 7% in 2021. Any individuals who received less than a 7% salary increase are now living with a tighter budget than they had the year prior, through no fault of their own.
This is a challenging time to be a leader, let alone a leader who is called to the highest standards of integrity and servitude. If you would benefit from peer-to-peer collaboration, learning and support under the mentorship of a seasoned and faith-focused executive coach, we encourage you to explore Convene membership.
This economic trend is an abomination
By: Jerry Bowyer | Originally posted in The Christian Post
It transfers wealth from the poor to the rich. It distorts absolutely every aspect of economic life. It inflames social tensions. It helps birth totalitarian regimes and scapegoating of outsiders such as ethnic minorities. It destabilizes nations and it has collapsed empires. It is monetary debasement. The more familiar word for it is "inflation," and it is probably the dominant financial story in the news right now. A poll published recently showed that 87% of Americans are extremely or very concerned about inflation. It routinely is showing up at or the near the top of lists of concerns of consumers and business owners. The most recent survey by the NFIB, a small business association, showed such a strong spike in the number of businesses that are planning to increase prices that it was at the highest level in 40 years. Our central bank has decided to target the stability of prices using a specific way of measuring inflation. It is based on something called the Personal Consumption Expenditures index. This particular method of tracking inflation (there are several others) tracks the prices of things people actually purchase. It does this by shifting which goods it uses to match shifts in buying patterns. If we buy half as much beef and twice as much chicken as last year, beef prices will be counted less and chicken prices will be counted more this year. It also takes out high volatility items. This inflation rate is currently at 30-year highs. In other words, the Fed is even failing the particular inflation test it chose for itself.
Who does this inflation hurt? In some sense it hurts everybody, at least anybody who deals with dollars, because it means that the dollar fails to hold its purchasing power. Think of it this way. If I went into your wallet, which has 100 dollars in it, and pulled out a five dollar bill without your permission, we would all acknowledge that I stole from you. But if our government-sponsored Fed manipulated the value of the currency in such a way that your 100 dollars is now worth only 95 dollars, meaning your hundred only buys as much as 95 would have a year ago, you have likewise been robbed, but it is less visible. The hidden nature of this makes it more, not less, objectionable because it adds at least an element deceit to theft.
But inflation does favor some over others. Think of it this way. When the price of consumer goods goes up, those mostly negatively affected are those who spend the highest proportion of their income on consumer goods. What people are those? The poor. The higher someone's wealth, in general, the lower proportion of their wealth goes into spending on consumables. When someone lives "hand to mouth," this means they have to spend it all to live, because there is no margin. A five percent increase in inflation without an accompanying pay raise is a reduction in food or shelter or clothing by a 20th.
— Finish the article on The Christian Post
About the Author
Jerry Bowyer
Jerry Bowyer is the chief economist of Vident Financial, editor of Townhall Finance, editor of the business channel of The Christian Post, host of Meeting of Minds with Jerry Bowyer podcast, president of Bowyer Research, and author of The Maker Versus the Takers: What Jesus Really Said About Social Justice and Economics. He is also resident economist with Kingdom Advisors, serves on the Editorial Board of Salem Communications, and is senior fellow in financial economics at the Center for Cultural Leadership. Jerry lives in Pennsylvania with his wife, Susan, and the youngest three of his seven children.