Understanding the Public’s Perception of Inflation
There’s a striking divide between the perceptions of regular people and the opinions of intellectuals when it comes to inflation. Employed intellectuals often dismiss popular wisdom, believing that their superior understanding and education give them a more accurate perspective. However, recent examples have shown that the popular wisdom on inflation may actually be correct.
According to a recent poll of swing-state voters, 74 percent of people believe that inflation is getting worse and moving in the wrong direction. This aligns with the record gold and Bitcoin prices we’ve been witnessing, as well as concerns expressed by the Federal Reserve. However, The Wall Street Journal’s Greg Ip argues that this perception is “simply not true” based on hard economic data.
Ip suggests that although inflation is still increasing, it is doing so at a slower pace than before. He compares this to losing weight at a slower rate, which is not the same as actually losing weight. However, most people believe that an improved inflation situation would mean a return to pre-pandemic price levels, which is unlikely to happen. This disconnect between experts and the public contributes to the frustration many people feel.
Furthermore, many people are skeptical about the pace of inflation improvement, fearing that another wave of high inflation could be just around the corner. The recent increases in food prices, up 35-50 percent since 2019 and still rising, contribute to this concern. While experts may argue that overall prices are not rising significantly, people encounter price increases daily when making their usual purchases.
The divide between experts and the public also extends to perceptions of the job market and the economy. Despite claims of robust employment growth, low unemployment rates, and GDP growth, the popular wisdom suggests that job conditions are worsening. Full-time positions are being replaced by part-time positions, mainly held by immigrant populations. The household employment figures show deterioration rather than improvement.
Moreover, there is skepticism about the reliability of GDP data, which is heavily influenced by government debt and spending. Without these factors, the United States could already be in a recession. This calls into question the credibility of GDP as an estimate of output.
When it comes to inflation, the public’s concerns go beyond rising prices. They believe that the current consumer price index (CPI) underestimates inflation, especially when considering the interest-based cost of borrowing. Some estimates suggest that last year’s inflation rate could be as high as 18 percent, far worse than the late 1970s. If we consider other factors like health insurance costs and use a different method for calculating inflation, the annualized rate could be even higher, possibly exceeding 20 percent.
Despite assurances from official economists that everything is under control, the public remains unconvinced. They see and feel the effects of inflation in their daily lives, which contradicts the narratives presented by mainstream media outlets. The public’s instincts about inflation are deemed correct by many, highlighting the divide between experts and regular people.
The disappointment in intellectuals and journalists who prioritize their careers over integrity is palpable. Many mainstream media outlets are experiencing shrinking payrolls as readers lose trust and turn away from their reporting. As public frustration grows, there is a sense of rising fury among the people.
In conclusion, the public’s perception of inflation differs greatly from the opinions of intellectuals and experts. While experts argue that inflation is improving at a slower pace, regular people believe that prices are still rising and their purchasing power has been permanently damaged. This divide extends to perceptions of the job market and the economy, with the public feeling that conditions are deteriorating despite claims of growth. The skepticism towards official narratives and the disappointment in journalists and intellectuals who prioritize their careers over integrity contribute to the growing frustration among the public.
