Thread by @AliVelshi

1/14
On paper, the U.S. economy is booming right now: jobs are coming back fast, businesses are open, wages are increasing, and the stock market continues to hit records. Yet some Americans are struggling to come up with enough money to pay for goods, food, and services. #velshi

2/14
It feels like everything is more expensive. It all boils down to inflation: the rise in price of goods and services. The question isn’t whether we really have inflation - we do. But just how worried should we be? #velshi

3/14
The Biden Administration had been calling it “transitory” - in other words, short term. Not permanent. But measuring inflation during an unprecedented pandemic can be tricky. America has seen inflation before. Plenty of times, actually. #velshi

4/14
Each inflationary episode different from the last. This figure here –provided by the White House - shows us all the times in American history when inflation was 5-percent or higher. I’ll go through them quickly. #velshi

5/14
In 2008, heightened inflation was caused by skyrocketing gas prices. From 1989-1991, Iraq invaded Kuwait leading to the first Gulf War. Elevated uncertainty around the world meant crude oil prices shot up. #velshi

6/14
The US experienced its longest stretch of heightened inflation in the 1970’s because of an oil embargo implemented against the west by OPEC, & a decline in oil production caused by the Iranian revolution. These last 3 inflationary episodes - all caused by oil shocks. #velshi

7/14
So, we can’t really compare what’s happening today to these episodes because, while we are paying more at the pump, oil supply is not the root cause of 2021’s inflation woes. #velshi

8/14
Let’s go a little farther back, to 1969. prices jumped because the U-S economy was actually doing really, really well—increased demand for not enough goods. #velshi

9/14
1950 might be a yet better comparison - the start of the Korean War: America was coming out of a recession. And families were reminded of World War II - when rationing and supply shortages were the norm. So, families rushed to buy goods, and prices increased. #velshi

10/14
This sounds more like what was happening in 2020, at the start of the pandemic. Demand is still high due to Covid-19, we’re just not seeing all the hoarding right now. The very best comparison to what we’re seeing now is the post-World War II era. #velshi

11/14
In 1947 - inflation skyrocketed to over 20-percent - the highest it’s been in nearly 8 decades.
The Bureau of Labor Statistics says the rapid post-war inflationary episode was caused by the elimination of price controls, supply shortages, and pent-up demand. #velshi

12/14
Bingo. Or almost Bingo, since we didn’t have price controls before the pandemic. But we are seeing supply shortages and pent-up demand. Here’s the good news. The Great Inflation of 1947 lasted about two years. #velshi

13/14
Prices began to level out as domestic & foreign supply chains normalized & consumer demand stabilized. & that’s probably what’ll happen this time around. But inflation can be scary, esp. if you're old enough, like I am, to remember what real inflation feels like. #velshi

14/14
The Fed Chair, Jerome Powell, has already said this inflation period has lasted longer than expected. He’s also said it’s likely not transitory, or short term. But it will end. We just have to figure what to do to help it end sooner rather than later. #velshi