Is Inflation the Next Pandemic?
Recently the price of gas hit a record CAD$1.49 per litre and the average home price in Ontario crossed the $800k mark. The price of 16 litres of vegetable oil increased from $21 to $45 within a month after a long period of shortage due to a disruption in the supply chain. In July a box of peeled beans sold at N28,800 and now selling for N39,300. Whichever currency is in question, an increase is an increase. The fundamentals of inflation are constant.
This pattern of price increase is being witnessed in the United States, Nigeria, United Kingdom, South Africa, and indeed across the globe. Inflation is on the rise and according to President Ford, Inflation is public enemy No 1. In Canada, inflation hit a fresh 18 year high of 4.4% while the United States records a rate of 5.3% compared to 1.37% in 2020.
In economics, Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living. Inflation represents how much more expensive the relevant set of goods and/or services has become over a certain period, most commonly a year (IMF)
It can also be described as a general progressive increase in the prices of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money. In simple terms it means more money chasing fewer goods. Inflation is a bummer for fixed income earners especially pensioners. They are experiencing real budgetary pressures as prices keep rising. The cost of living for the seniors keeps rising while income remains the same.
Central Bankers and Citizens are getting anxious. Inflation is now on everyone’s lips. Disrupted supply chain due to the COVID pandemic, government spending, and the exponential rise in consumption after the end of the global lockdown are driving the rapid rise in prices. It is a double whammy of monetary policies and COVID impact. This inflation is double-sided, there is pressure on the supply side as the cost of production is rising while the demand side is experiencing scarcity. Grocery stalls are scantily stocked while producers are reducing content in packs. Could it also be the greed of capitalism that is driving the trend of inflation?
It will take a very well-crafted set of monetary policies and moral suasion to rein in the galloping price increases across the globe. For sure, interest rates will be going up and governments will gradually phase out COVID unemployment support. New economic policies are definitely needed to manage this post COVID era.
Inflation can destabilize economies, disrupt governance and cause insecurity even in the most developed countries. We need to curb this inflation, otherwise, it may become the next pandemic.
By Bunmi Sodade.