Inflation on the RiseEssay Preview: Inflation on the RiseReport this essayAs seen in the economy today, America has made a comeback from a serious economic downfall. The United States unemployment rates have decreased by .9 percent within the last five months, and we can see an improvement in both producer and consumer price index and average hourly earnings, as records from the Bureau of Labor Statistics show. With the economy making a turn around, there is also a risk of serious inflation. Inflation is the rise in the general level of prices in an economy. When inflation occurs, each dollar of income will buy fewer goods and services than before, and therefore reduces the purchasing power of money. But inflation does not mean that all prices are rising, instead during a period of inflation, some prices may be relatively constant while others may even fall.
This paper will be talking about how the economy may oversee inflation in the United States in the near future. There are many pros and cons to expecting inflation. After the economy experienced and may be still experiencing an economic growth, there is still factors to consider about how the economy is going to take this future inflation.
An article written in The New York Times, which talks about gas prices rising, shows one con to an outlook on inflation. Gas prices are approaching record highs, but so far most Americans do not appear to be drastically cutting back their driving or even their spending as they did in 2008 (Hansen 2011). Economists are questioning what would happen if gas prices continue to go up and remain high. There was a survey done of about 100,000 stations that showed gas prices were now averaging $3.77 a gallon nationwide. The average is already more than $4 in California, Hawaii and Alaska, and analysts at the oil information service said drivers were paying more than $4 at some stations in at least three other states — Illinois, Connecticut and New York (Hansen 2011).
In this situation we see cost-push inflation because the price in oil, which is an imported raw material, goes up which drives the per-unit production costs at each level of output up also. The price level goes up making this a bad situation for the economy now, and if we see these prices continue to rise inflation may take into effect and cause our nation for a cost-push situation. But this could also generate a recession again, in which households and businesses concentrate on keeping their resources employed, and not on pushing up the prices of those resources.
In other cases, prices are falling while they are increasing at the same time. As said in one article we are being led to believe that falling prices are evil, and that only an increase in inflation can save our economy. From the moment the financial crisis took hold in 2008, Fed Chairman Ben Bernanke has looked to lower the dollars value and cause asset prices to rise – especially in real estate. The Fed cant control the exact rate of inflation, nor can it direct where inflation will be distributed across the economy (Pento 2011). Thus, we are seeing an increase in prices. Data released on the week of March 20th shows that the median price of existing homes declined 5.2% in February compared to the previous year, to $156,100. “New home prices fared even worse; the median sales price dropped to $202,100 in February, from $221,900 a year earlier – a tumble of some 9 %.( Pento 2011)”
But does that mean that prices would fall or increase at the same time? No one likes to say this as their fear of inflation. (And indeed, many economists argue that an increase in the value of the dollar is a bad thing, so we need to get a little more precise.) It’s not as if that’s true. In a recent research paper for the Heritage Foundation, economists Jonathan Dennett, Alan Greenspan, John W. Peterson, and Scott Rogoff pointed out that the price of housing increased by 4% over the last few years, before the current recession began. (Dennett has yet to explain it.) By 2007, after the Bush Administration had bailed out the banks and bailed out all but the most of the rest, the money the Federal Reserve created had increased from $200 billion to $300 billion.
Does that mean prices would go up or decrease at the same time? No. A large portion of the new jobs created since the 2008-2009 crisis were in higher cost housing. The data suggests it likely would.
Another issue is that not just inflation but also asset prices were much higher during the crisis. From 2000-2007, when the Bank of England first lowered its benchmark interest rate to 1% a year, the average return for housing back then-current-account loans averaged 12.54% (Fig. 1). By the end of 2007-2008, the average return for mortgage and mortgage-backed securities from current account loans exceeded the 20% range from 10-14%. The average return on those mortgages is much lower now than it was in 2008-2009, and while housing continued to grow, asset prices remained stable. On a yearly basis, mortgage costs and losses went back about 10 % for the same period.
The data released this evening (Pento is a bit less precise in this particular data) show the first half of August was relatively quiet (Fig. 1). In contrast, mortgage losses started to climb. These numbers reflect the fact that mortgage lending had been at a 12-month record or so and mortgage interest payments for that period (both 1-15% more than pre-recession) averaged only 1% more after the mortgage recession; we are not saying that mortgage prices are rising. The difference in mortgage payments reflects that there have been very little recessions, though we are less confident of the idea that there is so much of a drop.
The data of the Bank of England show that from 2001-2005, the average annual interest payments on new mortgage loans rose by 5.8% to $1,642,110—that is, more than twice the rate at which mortgage loans increased in the same period. This is the time when asset prices were at the same level as those before the crisis; they will continue to increase even in the next 3 years, so there is little reason to expect any real change in how the economy is going. In fact, the Bank has already said that it is “looking at” lending to households—that is, if we are willing to see their prices increase in the short-term for their mortgage debt, the Bank will have to make up the difference.
The first thing to say about asset prices is the size of their purchasing power. We have seen that mortgage holders want to borrow for homes with a 2% return on equity because of their ability to afford the amount they have currently. This is also part of why it appears we have started
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The data in Table 1 are not meant to be authoritative. Prices are usually driven by changes in demand, and are likely to increase with economic activity. However, data on a wider period such as the second quarter of 2011 may also be used as indicators of the trend. The decline in the median sales price is also likely to be driven by an increase in house prices across the city’s population, from $200,000 in February to $212,700. Additionally, the median sold price is likely to exceed the median rent amount and therefore, cause a decline in median sales. The data in Table 1 provide evidence that the Federal Reserve is attempting to raise the money it expects to earn in fiscal 2013 from the first quarter of the fourth year to fund further house purchases. In the second quarter 2011, house prices at $6,066.99 rose by 1.78% (from $1,534.13 to $9,961.28) and median selling per square foot (from $1,020.14 to $2,074.34). On the other hand, house sales rose only by 0.4% year on year to $1,847.74. As a result, house sellers received $3.25 per square foot less in income last year compared to $1,847.73.‘,
The data in Table 1 are not meant to be authoritative. Pricing data shows a large number of properties in the state which fall under one of the two groups of two, i.e., the non-profit, for-profit and government. Property sales do not necessarily reflect the level of investment in real estate. Additionally, there is no apparent link between the percentage of home purchases being for-profit and the economic growth rate. Moreover, some properties may have much higher real estate values than others. Indeed, the most important data sets may not be available for all households. On page 2.0 of the book entitled “Are Home Real Estate Prices Rising Again?” the authors point out that the median prices data released for February 2005 and January 2010 are not suitable for the data in Table 1. However, the data released on March 2nd do not reflect the current rate of growth in the US. Some of the items in Table 1 do appear to be increasing steadily, but even when these levels are high they may not be enough to lead to real estate rising in a significant part of this year. Thus, we expect the growth of prices as shown in the Chart for the past 5 years to have slowed, and then to finally have stabilized. The chart for February 2005 shows an increase of 5%, but we may find that the increase isn’t due in part to an acceleration of the rate of growth for the preceding two years or because of a series of large-scale corrections to the data. For instance, in 2005, when US home prices were low, the chart for 2008 showed a 5% increase. In the US, the chart shows an increase of 20 – 30% per year after 2005. After 2005, the data seem to reveal a pattern consistent worldwide as the increase to $10,000 is not the same as a 5% increase. Additionally, in France, after 2005, the US house price index has fallen from nearly 10th to the lowest all time. Furthermore, both the CPI and the World Stock Market declined significantly. The bottom line is that with higher
ᾒ,
The data in Table 1 are not meant to be authoritative. Prices are usually driven by changes in demand, and are likely to increase with economic activity. However, data on a wider period such as the second quarter of 2011 may also be used as indicators of the trend. The decline in the median sales price is also likely to be driven by an increase in house prices across the city’s population, from $200,000 in February to $212,700. Additionally, the median sold price is likely to exceed the median rent amount and therefore, cause a decline in median sales. The data in Table 1 provide evidence that the Federal Reserve is attempting to raise the money it expects to earn in fiscal 2013 from the first quarter of the fourth year to fund further house purchases. In the second quarter 2011, house prices at $6,066.99 rose by 1.78% (from $1,534.13 to $9,961.28) and median selling per square foot (from $1,020.14 to $2,074.34). On the other hand, house sales rose only by 0.4% year on year to $1,847.74. As a result, house sellers received $3.25 per square foot less in income last year compared to $1,847.73.‘,
The data in Table 1 are not meant to be authoritative. Pricing data shows a large number of properties in the state which fall under one of the two groups of two, i.e., the non-profit, for-profit and government. Property sales do not necessarily reflect the level of investment in real estate. Additionally, there is no apparent link between the percentage of home purchases being for-profit and the economic growth rate. Moreover, some properties may have much higher real estate values than others. Indeed, the most important data sets may not be available for all households. On page 2.0 of the book entitled “Are Home Real Estate Prices Rising Again?” the authors point out that the median prices data released for February 2005 and January 2010 are not suitable for the data in Table 1. However, the data released on March 2nd do not reflect the current rate of growth in the US. Some of the items in Table 1 do appear to be increasing steadily, but even when these levels are high they may not be enough to lead to real estate rising in a significant part of this year. Thus, we expect the growth of prices as shown in the Chart for the past 5 years to have slowed, and then to finally have stabilized. The chart for February 2005 shows an increase of 5%, but we may find that the increase isn’t due in part to an acceleration of the rate of growth for the preceding two years or because of a series of large-scale corrections to the data. For instance, in 2005, when US home prices were low, the chart for 2008 showed a 5% increase. In the US, the chart shows an increase of 20 – 30% per year after 2005. After 2005, the data seem to reveal a pattern consistent worldwide as the increase to $10,000 is not the same as a 5% increase. Additionally, in France, after 2005, the US house price index has fallen from nearly 10th to the lowest all time. Furthermore, both the CPI and the World Stock Market declined significantly. The bottom line is that with higher
ᾒ,
The data in Table 1 are not meant to be authoritative. Prices are usually driven by changes in demand, and are likely to increase with economic activity. However, data on a wider period such as the second quarter of 2011 may also be used as indicators of the trend. The decline in the median sales price is also likely to be driven by an increase in house prices across the city’s population, from $200,000 in February to $212,700. Additionally, the median sold price is likely to exceed the median rent amount and therefore, cause a decline in median sales. The data in Table 1 provide evidence that the Federal Reserve is attempting to raise the money it expects to earn in fiscal 2013 from the first quarter of the fourth year to fund further house purchases. In the second quarter 2011, house prices at $6,066.99 rose by 1.78% (from $1,534.13 to $9,961.28) and median selling per square foot (from $1,020.14 to $2,074.34). On the other hand, house sales rose only by 0.4% year on year to $1,847.74. As a result, house sellers received $3.25 per square foot less in income last year compared to $1,847.73.‘,
The data in Table 1 are not meant to be authoritative. Pricing data shows a large number of properties in the state which fall under one of the two groups of two, i.e., the non-profit, for-profit and government. Property sales do not necessarily reflect the level of investment in real estate. Additionally, there is no apparent link between the percentage of home purchases being for-profit and the economic growth rate. Moreover, some properties may have much higher real estate values than others. Indeed, the most important data sets may not be available for all households. On page 2.0 of the book entitled “Are Home Real Estate Prices Rising Again?” the authors point out that the median prices data released for February 2005 and January 2010 are not suitable for the data in Table 1. However, the data released on March 2nd do not reflect the current rate of growth in the US. Some of the items in Table 1 do appear to be increasing steadily, but even when these levels are high they may not be enough to lead to real estate rising in a significant part of this year. Thus, we expect the growth of prices as shown in the Chart for the past 5 years to have slowed, and then to finally have stabilized. The chart for February 2005 shows an increase of 5%, but we may find that the increase isn’t due in part to an acceleration of the rate of growth for the preceding two years or because of a series of large-scale corrections to the data. For instance, in 2005, when US home prices were low, the chart for 2008 showed a 5% increase. In the US, the chart shows an increase of 20 – 30% per year after 2005. After 2005, the data seem to reveal a pattern consistent worldwide as the increase to $10,000 is not the same as a 5% increase. Additionally, in France, after 2005, the US house price index has fallen from nearly 10th to the lowest all time. Furthermore, both the CPI and the World Stock Market declined significantly. The bottom line is that with higher
Meanwhile, over the same period, the dollar has dropped over 4% against other fiat currencies, according to the Dollar Index. As the dangers of inflation