What is inflation and how is it affecting things?

Question

There's a lot of talk about inflation lately and idk if people really understand what it is and how it affects the economy at scale. Figured I'd share some info to help explain whats going on right now.

Inflation refers to a broad rise in the prices of goods and services across the economy over time, eroding purchasing power for both consumers and businesses. Your dollar (or whatever currency you use for purchases) will not go as far today as it did yesterday.

There's two types:

Demand-pull inflation occurs when the demand for goods and services in the economy exceeds the economy’s ability to produce them. For example, when demand for new cars recovered more quickly than anticipated from its sharp dip at the beginning of the COVID-19 pandemic, an intervening shortage in the supply of semiconductors made it hard for the automotive industry to keep up with this renewed demand. The subsequent shortage of new vehicles resulted in a spike in prices for new and used cars (NYC is reeling from the demand).

Cost-push inflation occurs when the rising price of input goods and services increases the price of final goods and services. To offset inflation and minimize impact on financial performance, industrial companies were forced to consider price increases that would be passed on to their end consumers.

How does this impact us?

Energy prices, cost of materials, and wages are all going up. Industries like automotive and assembly, aerospace and defense, advanced electronics, semiconductors, and retail, are extremely volatile as they either dont have enough inventory (Tesla) or too much (Amazon), in both cases are failing to increase customer demand. This cocktail makes this a lose-lose situation since any wage gains made by customers are voided by the COL increases, literally everywhere. Globally, including China and EU are struggling as well. The war and geopolitical instability is showing its effects and frankly seems to be accelerating as governments try to tackle symptoms as they arise.

adorable · Accepted Answer

Then add opec (considering DECREASING oil supplies), bad politics (Biden killing the XL pipeline and more US drilling, Newsom forcing $20k+ solar panels on homes, EV vehicles that cost 2x+ conventional), short sighted CEOs (outsourcing and off shoring without regard to future supply chain vulnerability in computer chips to grain), artificial controls on the money supply (Fed, Japan yen propping), environmentalists (generally always increasing goods prices), etc.

One reason being an off grid prepper is smart, even if done part way.
  Don't have the money for a full off-grid power system? 
  How about a few months in food supplies canned and freeze dried stocked up?
  T-shirts and underwear? Stocked up years ago on big sales - never need to buy more for another decade. 
  Even simple things like pens and paper - stocked up years ago for a decade+.
  
Then, the smart ways of getting goods. From slickdeals.net black Friday and clearance threads to Craigslist - for sale - free stuff section finds on housewares to reddit's dumpster diving.

Always shocked how normal customers fall prey to Modern Marketing designed to take away Tons of your money when a clearance item of the same let's you buy multiples at the same price. Or pay at all given how much Craigslist free stuff is given away daily from bikes to dining tables and more.

Food. Bag of rice or noodles. Fresh/frozen/canned vegetables. 
Canned tuna, meats in bulk frozen. 1/3rd of each on a plate for lunch/dinner.
Box of cereal you can eat without milk like Froot Loops and Chex for breakfast. 
Add fruits here and there.

The really poor always gets free food at food banks.

No memberships/subscriptions unless absolutely necessary (E.g. 1 cell phone with unlimited tethering, no home internet, cable.)

TV? Free rabbit ears + tons of free movie, TV streaming services. Even Redbox has free tv + movies.
  
Electronics - always buy used. E.g. Even a Surface Pro 8 at $1500 new will be blowing out on ebay under $1000 in 1 year when the Surface Pro 9 is released. Even go for 2,3 generations older, spend $500 or less on an older Surface Pro.
No idea why people, esp. In IT, can't retire by 40 like me, but suppose they're blowing away $$$$$$ on Starbucks, Nike, NFL, Prime, etc.

Be smart - become frugal and inflation proof, then you can watch everyone else sink...

bububububububu · Answer

The situation in China is definitely concerning and I'm wondering how that is going to impact the global economy in the next few months to a year. I dont think we're really seeing the effects of their economy struggling and the reshoring news we're hearing is just a bandaid. Until the manufacturing actually starts kicking in (read 5 years from now at least) we're going to be in an ugly ecocomic period globally for at least a year or two. The war and climate change are exacerbating things too

What is inflation and how is it affecting things?

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