A New Reality of High Prices

A New Reality of High Prices

Al-Ahram, Egypt, December 4

Perhaps the most spoken-about topic these days, other than the coronavirus, is inflation – that is, the rise in prices. The price shocks of 2020-2021 are some of the worst the world has experienced in decades. In the beginning of the pandemic, prices rose due to the slowdown in production and the closure of borders. After the global economy slightly recovered from the shock, prices rose again due to supply-chain issues. Now, with the discovery of the omicron variant, we might be witnessing another wave of price increases. I am not an economist, but I do follow the statements and predictions of senior experts in the field. All of them, without fail, claim that what we’re witnessing are fundamental changes in economic thinking. For many years, economists have asserted that inflation is temporary: just like a wave, it goes up and then comes back down. But now that thinking has changed. Jerome Powell, chair of the US Federal Reserve, recently suggested that it’s time to stop using the word “temporary” to describe inflation. The idea that, ultimately, prices will decline, is no longer true. The irony is that Powell’s remarks came in response to criticism voiced by Egyptian-born economist Mohamed El-Erian, who urged the Federal Reserve to stop describing inflation as “transitory.” Speaking at a global conference in Abu Dhabi, El-Erian, the chief economic advisor at Allianz, suggested that the Federal Reserve is “losing its credibility” by ignoring the irreversible damage caused by rising prices. The American political pundit Ramesh Ponnuru explained that the rise in prices occurs either because people buy more, which leads to a shortage of goods, or because there is a shortage of goods due to production problems. During the past months, we began to read about a supply-chain crisis that has led to acute shortages in goods. What concerns me as an ordinary citizen is that my dream of making a stable income that will fulfill the needs of my family is no longer realistic. Inflation burns salaries to the ground. So much so is the case that many Americans, who are accustomed to price stability, are now complaining and asking for government support. And to make things worse, in addition to the obvious reasons driving prices upward, we in Egypt also have the problem of greedy gouging, wherein sellers raise their prices with the hope of making greater profit. Given this new reality, there’s no use in ruminating over the past. The world in which a carton of milk or a tray of eggs was only a few pennies is long gone. High prices are here to stay, and we must start accepting this reality. – Abdullah Abd Al-Salam (translated by Asaf Zilberfarb)

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