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Florida State University economist weighs in on local inflation

How it's impacting local businesses and more
Posted at 11:52 PM, Mar 01, 2022
and last updated 2022-03-01 23:52:50-05

TALLAHASSEE, Fla. (WTXL) — "Prices have been increasing."

John Wilson works as a bar manager at El Jalisco in Tallahassee.

He says he's seen prices go up slightly for some items at work, but has really noticed it in his day to day expenses which is not matched by his wages.

"I don't really see the benefit in difference of pay compared to price gouging and all that."

That's because wages might've gone up recently, but prices went up more.

Dr. James Gwartney is an economics professor at Florida State University.

In his 50 year career, he says this is the highest increase in money supply in the United States since World War II.

He says the increase is caused by money creation which can be blamed for the over 7 percent inflation rate burdening the nation.

But what is money creation?

"It's those 600 dollar checks, 1200 dollar checks whatever they might have been for various individuals or businesses."

COVID relief money borrowed from the Federal Reserve which increased the overall money supply by 16 percent in 2021.

A typical money supply increase associated with price stability is 5 percent.

So what does that mean?

"People have larger money balances than was previously the case and they turn around and spend them."

More spending on everyday goods, services, and homes which translates to…

"Prices of cars will go up, virtually everything is increasing in prices, it's possible in the upcoming year we may see larger price increases in housing in Tallahassee."

And that increase is hitting lower- and middle-income individuals the most since a larger share of their income goes to everyday items.

So how do we fix it?

One idea that's been discussed; the Federal Reserve increasing interest rates, which could cut back on consumer spending, and hopefully reduce inflation.

Dr. Gwartney predicts a 4 to 6 percent inflation rate could continue between now and 2026.