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Inflation psychology | Economy

Written by ebookingservices

What do they say to an Argentine. Inflation has a back and forth psychological component. We are living the way out now in much of the world. They are the rising prices and the feeling that they are not going to stop in a while. Citizens have grabbed in the spring at the beginning of summer to “let’s spend now because everything is going to be more expensive even in a short time.” The psychological return is not pleasant either because the feeling of being poorer is harmful for income expectations, for spending, for economic animation and for social progress. It is the part where our mind and our expectations feel trapped by a sensation that they do not control. It is the risk of the self-fulfilling prophecy that we seem to live this summer in Spain.

This Friday the INE confirmed the data for July in our country. A year-on-year rise of 10.8%, the highest since September 1984. It scares many. It is something more than technical. Gas and electricity continue to weigh, which raise the section on housing expenses, despite the measures adopted against it. Upload food, drinks, clothing, transportation. On the street it shows. And improvising a vacation buying them now costs a kidney. Plane tickets or tourist packages are not very accessible at this point for the summer. If we discount energy and unprocessed food, core inflation remains very high (6.1%).

“Inflationary psychology” is a recognized economic concept. Change short-term behavior in expectation of higher future prices. Thus, for example, in the absence of definitive official data, different sources suggest that this summer we Spaniards have spent more in June on tourism than in the same month of 2019 but in July and August it seems not to be so. High occupancy (most reservations are paid months in advance) but less expense. The sensation of a colder autumn (energy and economically) is also noticeable.

Economists also walk a bit for the couch. It is true that this is not the inflation of the crisis of the seventies, but it has its own worrying components and arises in an environment of international dependencies and very important geopolitical risks. Cyclothymia was also observed this week in USA. Inflation falls six tenths (up to 8.5%) and some are already asking central banks to relax.

Then there are the policies to try to curb this problem somewhat. Rising prices is a tempting political throwing weapon. Establishing adequate incentives is crucial to avoid second-round effects and, in particular, price-wage spirals. But also understand that this is everyone’s problem. That’s why, Spending weeks sterilely debating whether shop windows should turn their lights on or off at night does not bode well for what may come. It already happened to us in the pandemic, we could only react forced and when we had it on us. Autumn is getting closer.

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