4 Scary Facts About Inflation In the US

  1. The Effects of Inflation on US Small Businesses in 2021 | Business.org

Your average Joe might consider inflation rates to just be a political term used to sell one party over another. Though this is sometimes the case, the US has a real problem on our hands that is affecting the lives of each and every one of us. Here’s the explanation and why you should care:

1.Inflation is Skyrocketing

Have you noticed that lately prices at your local supermarket or fast food establishment have gone up dramatically? The reason for this unfortunate change is inflation has increased by 7.5% since last year. This is very alarming because the average increase of inflation in a year sits around 2%. That’s almost 4 times more than usual! These disastrous levels of inflation are most likely due to the aftermath of giving out so many stimulus checks during the pandemic.


2.Low-Income Americans are Hurting

Despite having a safety net of government programs such as welfare, low income Americans are the most affected by the increase of inflation. According to the United States Joint Economic Committee:

“Global polling from researchers at the World Bank and International Monetary Fund found that individuals who self-identify as very poor have a 10.5 percent higher probability of naming inflation as a top national concern than those who identify as rich. The researchers also found that rising inflation is associated with increasing poverty rates.”

The weight of inflation is a huge factor for why the less fortunate continue to struggle. The huge increase in gas prices makes the simple task of driving to work everyday a costly investment for many.


3. Small Businesses Are Getting Slammed

Have you ever been to a local coffee shop and noticed that the prices are higher for a similar product than at Starbucks? The reason for that is these smaller businesses don’t have the multimillion dollar supply chains, equipment, marketing, financing, or machinery to make that same cup of coffee. In simple terms what this means is, while Starbucks is efficient enough to make a 3 dollar cup of coffee for 3 cents, smaller businesses have to spend far more to make a similar product. For this reason, small businesses have to charge higher prices to stay afloat. How does this tie in with inflation? Higher inflation causes this gap in efficiency and prices to increase further. This discourages the average consumer from helping out their local mom and pop stores and ultimately brings that business to large corporations.


4. The Stock Market Has Entered Veteran Difficulty

Another way hardworking people try to get ahead in life is the use of the stock market and other investments. Unfortunately, inflation dwindles the average return of short term investments. For individuals with less income to spare, this is tough news. Here’s what Investopedia has to say about this correlation:

“inflation’s varying impact on stocks tends to increase the equity market volatility and risk premium. High inflation has historically correlated with lower returns on equities.”

If you’re interested in getting a deeper dive on any of these topics, here are the sources I used:

Inflation’s Impact on Stock Returns (investopedia.com)