This is Pastor Tim’s article that appeared in the Evening Leader on Tuesday, Nov 8, 2022
For today’s article, I want to explain a word to you that has been thrown around a lot lately. The word is inflation. You hear that word quite a bit, and on the surface, you know inflation means that the price of goods and services rises over time. If you look at prices from years ago and where they are now, that is the rate of inflation. Inflation ebbs and flows year to year. The highest it has been in my lifetime was in 1980, when it reach almost 14%. That means a good or service that cost $100 in 1979 would cost $114 in 1980.
Availability is the name of the game for inflation. If I have 5 cars to sell, and I have 20 people who want those cars, the value will increase. That is because with so few cars available, the price can rise to the highest amount a person purchasing the cars is able to pay. Now, if I have 20 cars to sell and only 5 people wanting to buy them, the cost is going to go down because there are plenty of cars for everyone. The 5 people will be able to purchase the best cars I have because there is selection and availability.
With that analogy, here is how inflation works. There is a minimum amount I am willing to accept for the cars I am selling. In order to make a profit and maintain my dealership, Let’s say I have to get $8,000 for each car. If there are only 5 people who can afford $8,000 for a car, then they will get their choice. Then I can either keep the other cars for myself or I can lower the price so that more people will be available to buy them.
Now suppose, for whatever reason, in my analogy, I have those same 20 cars. However now there are 35 people who have $8000 available to purchase them. That means I need to raise the price to the highest amount I can get for the cars so that I make a higher profit. The price now may be $10,000. Because of how much money there is available, it has created a scarcity of cars available to purchase. Over time, this is not a big problem. Theoretically, wages and salaries of workers should be slowly moving up to allow more people to be able to afford basic goods and services as the prices increase with inflation.
Sometimes things happen that can cause a spike in inflation because there are suddenly way too few goods and services to purchase. The COVID shutdown was a prime example. As the government forced more and more factories and businesses to close, there were no goods and services being produced. As those back ups continued, the price of the few cars that could be produced were incredibly expensive. The scarcity of the cars meant there were very few to purchase so the ones that were available went at top dollar. Then what superheated the economy is that the government was giving out stipends to help people make ends meet during the lockdown. That put a lot of money out there in the market to chase fewer and fewer goods and services. When there are plenty of people who can afford something, the price will go up because of the demand for it. Lots of money that was available to spend that had not been earned by producing anything. That led to a situation where there was money out there but nothing to buy. That made the price of everything go up because there were no goods and services to purchase with the money that was available.
Yes, part of what we are feeling now is the aftermath of the COVID lockdown. Inflation is how the market heals from something as unnatural as shutting the economy down. Our economy was damaged by the lockdown and it will take some time to heal.
Economies are sort of like living organisms. They get sick and they get healthy, sometimes they are robust and other times they are sluggish. We need to do our best to take care of ours because that economy is what provides the means for us to survive. While the economy is obviously not the only criteria we consider when electing our leaders, it is an important one. Elected leaders are the caretakers of the economy, and we want them to make decisions that will make it healthy because that is the difference between struggling and having plenty for many families.
Love them or hate them, that is what we elect leaders to do, and I hope you will join me in praying for those leaders. They have accepted a difficult job and we want them to be successful in keeping our country strong.