Disregarding chip shortage, this sounds like a reasonable outcome after the pandemic anyway. Somewhere, all that money that was lost needs to be recuperated - partly in inflation.
No, that's not the type of inflation that benefits anyone.
Stagflation is what happens when you have a supply shock (usually natural disaster, political instability, bans or outright wars). Prices go up but incomes do not because nobody is being hired.
For example, when you ban recreational drugs, the cost of drugs goes up as the supply dries up. At some point you can't raise prices anymore and the dealers start cutting the drug with whatever they have available like fentanyl.
What we need is an inflation cycle closer to this ideal: consumers start buying products -> productive companies start earning more -> companies start producing more products -> companies hire more workers -> companies raise wages -> new consumers enter the market that start buying products. Once you reach full employment you raise interest rates to calm the market down and then everything is perfectly fine.
Restaurants are one of the few places where we see the "good" type of inflation because it is resulting in higher wages.
Ah, I didn't meant it as something I think we "need" or what I "like" -- just what I think is coming. Governments have used a lot of money to pay for things: the supply of money has been diluted heavily, and this together with other effects like decreased productivity, will lead to inflation.
Supply and demand example: governments have created a lot of money to pay for extraordinary expenses in 2020 and 2021. Supply of money is now greater and this leads to rising prices (i.e. inflation).
What I mean by recuperation: We don't create more value just from creating money. So if there is more money to go around but the same amount of goods produced, that leads to inflation. We're talking about inflation to adjust for the money created to cover expenses.
So you think everything should cost 10x what it cost last year? Doesn’t seems reasonable to me. Seems like some things are up that much because of supply and demand.
