The Infection of Inflation

by Nina Mitchell (she/her)

From soaring unemployment to government stimulus checks, COVID-19 took an economic toll on the world that is still being experienced today in the prices of everyday products. Though the pandemic led the global inflation rate to increase faster than normal, rates are not dropping as quickly expected as the world moves on.

“Inflation is often described as too many dollars chasing too few goods,” Petaluma High School economics teacher Andrew Aja said. “When we look at COVID, and the response that we have to it, doing things like extending unemployment benefits, stimulus payments, all of those things lead to more money that’s out there.” This increase in money has caused prices to skyrocket, though unevenly.

Gas prices in the Midwest have begun to drop but continue to rise throughout California and are expected to rise at least another 30 cents a gallon. Still, the U.S. is not the only country facing troubles caused by inflation.

With a global inflation rate of 9.22% as of March of 2022 — the highest percentage since the early 1980s — many nations rated inflation as the top problem of 2022.

Venezuela, a country struggling with hyperinflation ever since oil prices plunged from 100 to 30 U.S. dollars in 2016, had an inflation rate of 1198% at the beginning of 2022, the highest in the world. As a result, there are no longer set prices for the merchandise being sold; instead, customers are encouraged to ask employees what each item costs daily. Sudan (340%), Lebanon (201%) and Syria (139 %) are all dealing with inflation-induced difficulties. Everyday necessities like food and water have become too expensive; citizens have protested for years, even prior to COVID.

Recessions have been known to follow after periods of high inflation, leading people now to worry about entering a recession once the inflation rate drops. Aja believes it is “hard to predict” whether or not a recession will come about.

There are multiple indicators that different people look at, including the paradox of thrift. “The paradox of thrift is, if I think there's going to be a recession, I might save my money, more than I typically do… and so if I do that, that's okay… if everybody in society does that, or if a large number of people do that, then it actually can bring about the recession that we fear is going to happen,” Aja explained. “If everyone starts saving more, instead of spending, the demand for goods and services will go down…then employers might realize they don't need as many employees and that they may reduce their workforce, leading to that common downturn that we're trying to avoid.”

With prices at an all-time high, many are wondering: When will inflation begin to drop? “We thought it'd be more like a spike, but really, it's been kind of more like a plateau… we haven't gone down yet, but we've kind of stopped increasing,” Aja said. While there is no definite answer, it is anticipated that inflation rates worldwide will begin to drop over the next two years, most likely towards the end of 2023.