Anyone who has been paying attention has probably noticed that the price of many goods are not only rising, but exploding. Food, gas and building-material prices have risen every month for nearly a year.
I am in the building trades and have never seen anything like the escalation of costs in the 35 years that I have been working. I keep hearing that this is being driven by the pandemic but at a certain point that is hard to accept. Did the American plantation forests disappear? Is every mill in the U.S. and Canada closed? Did Brazil, where most of our plywood is coming from, stop making it?
A year ago, my associates and I in the building trades were concerned when a sheet of three-quarter-inch plywood hit $34. Currently, with tax included, it is more than $74. It is the same with all the items that go into building a house. My question is, are companies taking advantage of the current situation and, if so, who will step in to put a stop to it?
The building industry is a leading economic indicator. New home construction drives a large segment of the economy. If prices do not revert to pre-pandemic levels it will hurt the nascent recovery. Without federal intervention I am certain they will not.
Richard Shea, Cold Spring
Yes. We are in the early stages of a very disruptive bout of inflation, even shortages, in many if not most, but certainly not all, products, goods and services. The reasons are many; I will summarize those most contributing to the situation.
It seems that, in attempting to prevent a 1930s style Depression in the national economy, the Federal Reserve, directly and indirectly has been, in effect, printing vast amounts of money, causing the credit system to be very accommodative, and making money and loans very easy to obtain. This has been going on now for over a decade. Also, the US federal government, more recently has been approving massive appropriations bills, commonly referred to as “stimulus”, and is borrowing money like never before (certainly not in “peacetime”) in the nation’s history. In short, greater and greater amounts of money chasing the same, or similar, groups of products or services, results in a devaluation of the value of pre-existing money (wages, savings, etc.), and a vast increase in the price of many, but not all, things commonly sought after in a normal economy. The most visible result, and I think the most pernicious, has been in the housing markets, and in the various commodities, products and services related to these markets.
Some people have said there is too much stimulus being added to the economy. At this point, I tend agree with that viewpoint. President Biden is asking for another federal appropriation in the form of a massive investment in what he terms infrastructure. It is in part the expectation of more stimulus that is driving, in part, ongoing investment (or speculation, if you will) in housing, in commodities prices, in cars, semiconductors, in land, in common stocks.
If the federal government reduces its spending, the bubble may burst, the prices of housing and of common stocks can undergo an “correction”, the economy would slump, with many jobs lost and high rates of unemployment.
The US economy is, in effect, out of control. In my view, it cannot be corrected to any normal condition (they way it used to be years ago) without great pain, and without the attendant possibilities of even greater political risk.