Inflation: A Federal Problem that Implications at the Local Level
For a typical American worker a hundred years ago, earning $20 per week was the norm and half of this could be spent on a nice suit; he could choose to get paid in gold or cash which were both of identical worth. Fast forward to today, this no longer holds as the current value of gold can purchase a nice suit but a $10 bill can’t and the purchasing capacity of the American dollar has significantly declined.
Social and Economic Disparities Caused by Inflation
This hundred year inflation is credited to the Federal Reserve’s monetary policy with its stated 2% annual target, an act widely seen as a form of theft. It adversely punishes savers and encourages wasteful spending. As more money is printed by the Federal Reserve, hard assets like property, stocks, and precious metals increase in price. Inflation is often described as a concealed tax, allowing the government to pay its debts using depreciated currency.
The deterioration in wealth distribution is a direct consequence of stagnant salary growth in the face of increasing inflation, creating a wider gap between those without assets and those with substantial assets. The widening wealth gap spells doom for middle class stability, leading to political instability in the democratic society. Social media, powered by human envy, amplifies the inequality, eventually leading to debt-induced faux affluence, contributing to a vicious socio-economic cycle.
The Impact on Local Economies
Local policy makers may not have direct control over Federal Reserve policies, but they can mitigate the damaging effects of property inflation and escalating property taxes. This can be achieved primarily via cost control in local governance. When taxes are levied on highly inflated property prices, it becomes practically unaffordable for the average person to buy a home.
High profile cities such as San Francisco have already seen their once-thriving middle class migrate out of the city, in part due to skyrocketing property prices. Many local homes have been converted into rental properties by private equity, upsetting the balance of home ownership.
What can be done?
Community service in modern times often appears to be a cycle of spending more money. Many Council members appear to favor popular monetary indulgences like creating public gardens, installing speed bumps in specific neighborhoods, or establishing remote parks potentially incurring unexpected costs down the line.
For instance, instead of pouring money into elaborate education budgets, a more efficient allocation could involve restructuring the education system, such as hiring PhD holders to tutor small groups for improved academic results.
Unfortunately, management-level roles in the public sector rarely attract seasoned professionals from top industries like law, finance, engineering, and business who possess the required wisdom and experience to implement effective changes. Until people with such qualifications become more involved, we may continue to grapple with increasing inflation, spending, and taxation.
In conclusion, while inflation could be categorized as a federal problem, the implications extend way beyond the central government. It not only influences local economies but significantly impacts individual lives. The urgent need of the hour is collective action at every level to combat this age-old economic malaise.
