Fresh from his extended vacation, Biden’s inept Transportation Secretary, Pete Buttigieg, did a media tour to explain that the economy is a mess because it’s so awesome. And then he warned that the awesomely messy economy in which stores don’t have products in stock, prices keep climbing and products keep shrinking, will continue into next year. But don’t worry, it’s a “high-class problem”.
Meanwhile quieter voices in the camp are warning that it’s the new normal.
“Workers are demanding pay increases since they can see their wages aren’t buying as much with so many everyday necessities costing more, including rent. That leads companies to hike prices more, and then workers turn around and demand another pay raise. Economists call this phenomenon a “wage-price spiral.” It often leads to sustained high inflation that forces the Fed to step in to stop it. Alternatively, consumers could pull back on spending as they fear high prices, another scenario that is harmful to the economy and could lead to a recession.”
As long as the government keeps throwing money in, a certain population group may go on spending. Meanwhile, wage increases look to be overshadowed by price increases as the spiral continues. Dems will get their “Fight for 15”, but by then a burger will cost 15 bucks.
FedEx recently announced one of its heftiest price increases in years. Pepsi said this month the company expects “to be able to price through the inflation that we’re facing,” meaning they can largely pass it along to customers.
Housewares and beauty product company Helen of Troy, with brands like OXO storage containers, Drybar hair dryers and Hydro Flask water bottles, signaled more price increases are coming during an earnings call last week.
“We’re assuming that the inflation is not going to be transitory, and we’re positioning ourselves accordingly,” said Chief Executive Officer Julien Mininberg.
There are also early signs of wage-price spirals building, especially in the restaurant sector.
Fuzzy’s Taco Shop in Wichita, Kansas, is about to raise menu prices for the second time this year. Operating Partner Whitney Reitz said she had no choice. Over the summer, she raised starting pay from about $8 to $10 an hour to attract workers, prompting a menu price hike. Then she bumped pay up again, adding 50 cents to $1 more for workers who stay a month. By the fall, starting pay was up to $12 an hour. Now another price hike is coming on the menu.
“The wage-price spiral has already begun,” said economist Sung Won Sohn of Loyola Marymount University and SS Economics. “In the financial markets and the economy, the biggest long-term problem we have is inflation. You can’t turn the inflation rate on and off.”
The dollar store is dead. And homes and cars are becoming unattainable.
One clear sign that consumers are getting spooked by higher prices is Americans’ plans to buy houses and cars are at the lowest levels since the early 1980s, according to the University of Michigan Survey of Consumers.
When people can’t afford a home or a car, they won’t buy them.
Meanwhile the Biden push to raise gas prices is raising costs across the economy.
”It’s painful. This is truly psychological. Diesel is near $4 a gallon now, which means truckers are paying $1,000 a fill up a tank. It takes three fill ups to drive from the East to West coast. That really eats into your profits,” said Lee Klass, one of many independent truck drivers who owns and operates his own truck. Before the pandemic, it used to cost about $750 to fill up.
Klass said diesel prices are the dominant topic of conversation at truck stops. Despite the need for more truck drivers, some independent truckers are starting to hesitate to take certain loads with gas prices so high and fuel surcharges not yet adjusting.
”If the rates aren’t good enough, people just won’t do it,” Klass said.
And that’s about to lead to Biden’s Black Christmas.