Competition for Resources
As Americans, we have been accustomed to having whatever we wanted, whenever and whereever. As many other parts of the world ascend the standard of living ladder, they are causing intense competition for many resources. There has been a lot of press about price inflation in various segments of our economy. I view a lot of this as a process of prices finding "equilibrium" around the world. One important difference will be that the percentage of income that must be spent on basic necessities is much higher in "developing" nations. This could prove interesting over the next few years, as we have seen a lot of inflation in basics (food, energy) around the globe. If the people in these countries (which produce many "cheap" goods that are imported to the US) cannot survive on the wages they are earning, then wages will rise, as will the cost of the goods they are producing. This will continue the inflationary cycle.
How to deal with inflation on a personal basis? There are really only two considerations - earn more, or spend less. Our brilliant government has this figured out. They know that most people cannot increase their income, so they are sending us $600 so we can spend to "stimulate" the economy. Well, it is a stupid idea to begin with, but particularly now. There was a time - and not so long ago, when spending money would truly have a rippling effect in our economy. But let's think for a minute. Many, many manuacturing jobs have been lost over the past 20 years. So buying that refrigerator with your "stimulus" payment will now stimulate someone else's economy, not ours.
