Fuels drive price increases in the United States and spill over to the rest of the economy’s prices.
Inflation in the United States reached 9.1% per annum in June, the highest in the last 40 years (November 1981), and more than half of the increase (7.5%) was driven by the rise in the Energy Index, the result of an 11.2% increase in the price of oil over that period.
The underlying (“core”) inflation, net of energy and food, recorded an annual increase of 5.9%, practically the same as in May, but higher by 0.7% monthly compared to that of the previous three months .
Joe Biden, president of the United States suffers from the inflation generated by the Russian invasion of Ukraine.
It should be noted that this increase occurred throughout the entire economic structurea, including the service sector (over 70% of GDP), which has grown by over 10% in the last 2 years.
The North American economy showed an annual contraction of 1.6% in the first quarter of the year, while the Federal Reserve in Atlanta, which measures gross product in real time (AFD Nowcast), indicated that the second quarter would record a decrease of 1.8%; what it would plunge the United States into a recessive phase in the first 6 months of the year.
The Federal Reserve raised the federal funds rate by 0.75 percentage points in early July; and warned that it would increase it at least 7 more times by a similar percentage in 2022 and 2023, to a level of 6% per annum, which is the same level acquired by the boom in demand over the past two years.
Walk around looking for prices. Inflation has created a new price level in the United States and forced consumers to search for prices.
After knowing last month’s data, the Federal Reserve would opt for a one percentage point hike at its July 29th meeting.
That one percentage point increase in July would take it to a 3.5% / 4% level at the end of 2022, which it would necessarily entail a contraction of activity.
The Federal Reserve’s goal would be breaking the vicious circle of systematic increase in inflation expectations long-term in which the US economy is already submerged.
What is certain is that this implies a crushing of demandreducing it from the current level of 6% per annum to 2% over the next 2 years, which would necessarily mean a increase in unemployment by at least 3 pointswhich would then go from the current 3.6%, the second lowest in the last 60 years, to 6.5% / + 7% at the end of 2023.
The inflationary phenomenon experienced by the US is manifesting itself throughout the advanced world, reaching a record rate of 8.1% per year in the Eurozone, the highest since the appearance of the single currency in 2001; and 9.1% per year in the UK, also the highest in four decades, and where the cost of living has increased by more than 30% from last year.
In all cases, these exceptional levels of inflation they are a consequence of the record cost of energy which caused the combination of the war in Ukraine and trade sanctions imposed on Russia by the United States, the European Union (EU) and Great Britain.
What happened with the impact of the war in Ukraine and the sanctions imposed on Russia after the February 24 invasion was a breakdown of coordination and cooperation mechanisms which are intrinsic and necessary for the functioning of the 21st century capitalist system.
In structural terms, the capitalism of the time is an integrated system of transnational productionin which the fundamental decisions that make it work are taken in real time and on a global scale, through an instant integration process that accomplishes the revolution of technology in its form of digitization.
The fundamental consequence of this break is that it has broken out the three great crises of the time, which are food, energy and inflation.
Paradoxically, The country most affected by this failure of the system’s cooperation and coordination mechanisms was the United States.the first global superpower and the main promoter of sanctions against Russia, while leading the long-term and protracted global war that has become the Ukrainian conflict.
Inflation: a revolution in falling expectations
More than 90% of North Americans estimated in July that the direction of the country was wrong; and over 60% of Democrats reject the possibility that President Joe Biden will lead the ruling formula in 2024, at the same time as the commander-in-chief of the US military at this time of the global war against Russia.It has only 33% support in American opinionthe lowest level since the early 1930s.
The US mid-term elections, in which the control of both Houses of Congress (Senate and Representatives) is at stake, will take place as established by the constitution on the first Tuesday of November 2022; and all the polls indicate it A crushing defeat looms for the Democrats and President Joe Biden.
Inflation raises bread in the US and there’s the shock: “We haven’t seen this before”
The distinction between political and economic in capitalism it is purely methodological and does not exist in actual fact. It’s a blackboard phenomenon, a usually useful exercise in abstraction, but nothing more.
That’s why the rule in the United States and around the world is that reality always prevails.
Americans are hungry for change, so be prepared for new turmoil
More inflation and less growth: the gloomy outlook for the European economy
War in Ukraine and inflation are major challenges for the global economy, the United States warns
Jorge Castro
Source: Clarin
