You’ve been feeling it every time you buy almost anything. Inflation seems to be getting worse. Dr. Matt Will, economics professor at the University of Indianapolis, says you should probably be getting ready for even higher prices because of the Russian war and the government’s methods of controlling inflation.
“October, people don’t remember, but it was below seven percent. It’s been revised to up to 10.8 percent. So, the inflation is worse than we thought,” said Will. He said it is costing businesses more to produce their products, which will have to be passed along to the consumer.
You may have heard Pres. Biden say that companies should not cut wages, but instead cut costs. Will said he doesn’t believe that approach will be successful.
“Government tends to respond to inflation by trying to control prices. That is a mistake. Not once in the history of the world has that worked. What it does is it causes shortages,” said Will. “Gas lines in the 70s, shortages of consumer goods at other points in history.”
Will said he doesn’t see much relief coming.
“The only way to reduce inflation is for the government to stop spending money and to increase the Fed funds interest rate. The Fed and the federal government control whether or not we have inflation.”
Will said the war in Ukraine is going to cause prices to go up on many products, not just oil and gas.
“Russia is the largest exporter of grains, fertilizer, nickel, palladium, they also send 40% of the natural gas in Europe to Europe.”
Will added that Russia produces about ten to twelve percent of the world’s oil.
“When these things are reduced and they can’t be exported by Russia, that will also increase prices for the consumer, on top of what the federal government of the United States in doing,” he said.
He said that COVID; the supply chain problems, exacerbated by a labor shortage in California; federal government spending and the global political crisis are all making it seem to economists that inflation will not let up anytime soon. Will said that the impact will be lessened in Indiana, at least with state government, because the state’s fiscal house is in order, with a surplus.
