‘Ultimately, I wonder: Will our economy head toward a hard landing? Efforts to curb inflation may result in strangling the economy to cool it down but this in turn can lead to a recession.’
OUR finance experts in government are sounding the warning —
inflation may hit 9% or a little higher, at a time when the rest of the world is also doing what it can to keep consumer prices down and stop inflation from running away.
What’s inflation anyway? It’s the measure used to determine the change in the cost of goods and services from one period or another. Rising inflation means that people have to shell out more money to obtain the same amount of goods and services as they did before.
Which means in turn that the person’s take home pay or the money in his wallet or pocket becomes less in value because it can buy less.
And that’s where the push comes — employees begin to seek an increase on their take home pay, to keep up with the rising cost of goods. If companies give in, then there will be more money to buy goods and the law of supply and demand results in even more price increases. The cycle continues — employees will seek higher wages.
It’s called the wage-price spiral and it can be deadly.
But inflation is deadly, too. And its main victim is the middle class that gets squeezed by price hikes. You see, the poorest of the poor are used to surviving on nearly nothing and more of nothing means nothing. On the other side of the spectrum, the really rich have so much leeway — so much extra fat you can say that a troll here or there will hardly be felt.
But the middle class doesn’t have the luxury of being used to abject poverty or abject wealth. So, it’s they who feel the crunch. Grocery. Utilities. Rental. Tuition. Health and medical care. With no extra to spare a little increase here or breaks the (coin) bank.
And so once again, we wait and see how our monetary authorities will be able to handle this new difficulty. Will it be by raising interest rates, which means to entice people with money to keep their money in the banks and not spend them — because spending is what boosts inflation? That’s what most governments the world over have been doing since 2021. But the results have been mixed.
Government can also provide conditional cash transfers to help the poorest of the poor but this, too, can be inflationary. Most governments would want to slow down or cool down an economy and having more funds in circulation will only achieve the opposite. But the neediest will need help.
And the middle class, too.
Ultimately, I wonder: Will our economy head toward a hard landing? Efforts to curb inflation may result in strangling the economy to cool it down but this in turn can lead to a recession. And that’s the even bigger worry, abroad as well as here.
But who can tell? So, let’s all sit tight and prepare for the worst just as we should all hope for the best.
