Inflation is one of the ways that the economy self corrects itself over time. Prices seldom go up uniformly so as prices of used cars rise, new cars get more popular and vice versa. Of course when the cars are impacted by an outside issue like chip shortages you see less availability of new cars increasing the demand on used cars.
The outside pressure is the shortage of chip components.
We see a big deal being made over the inflation numbers, but it still looks like a temporary increase that will fix itself once the supply issues sort themselves out. Of course that is tricky and if you look at history all inflationary increases were temporary to some extent.
So how long will it last and is it really a problem? The current surge in buying is to some extent pent up demand from the pandemic. The pandemic also contributed to reduce supply as restrictions impacted production of certain items. The pandemic also contributed to the backup of container ships as harbors were short of workers to process them.
There is probably enough pent up demand and a certain amount of relief buying to carry us into the next year. Will the media coverage create additional political issues as they harp on the ruinous inflation? Well it might. Most Americans see some increase in gasoline. Certain grocery items have also increased.
As the various media harp on it, it leaves an impression. Where I live the local news report every morning about what stations have the cheapest gasoline. It certainly adds a sense of urgency to the whole situation.
An item of interest is when they tell us the price and say it is the highest since a past year.
That means it isn't the highest ever.
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