There's a vastly overlooked factor that's stoking record inflation: Rich people

[ck4829]

Perhaps the most overlooked engine fueling inflation is the "wealth effect," the extra spending from Americans feeling flush as their stock portfolios and home prices jumped by trillions during a tag-team, Olympic sprint for both. By far the biggest share of the extra outlays on the likes of new cars, home improvements, and laptops comes from America's top income tiers. Besides opening their wallets as their net worth swelled, those high-earners—who own the most expensive houses—tapped the fast-rising value of their manses as ATM-style fonts for cash. The sudden spike in their nest eggs and their cash-out refis keep the cohort spending at rates far faster than before the pandemic struck. And because that elite group accounts for such a huge share of overall consumption, it's also a leading, and widely ignored, force in driving inflation that reached 7.5% in the January CPI reading, the highest level in four decades.

Put simply, the well-to-do, hugely compensated Americans contributing greatly to soaring prices is the class least damaged by the rampant inflation. So far, higher prices don't seem to bother them and have done nothing to curb their record shopping spree. If deep-pocketed families feel the inflation pinch at some point, they harbor plenty of wiggle room to trim back by shortening vacations, ordering fewer features on a new Chevy Suburban, or dining out once instead of twice a week.

https://fortune.com/2022/02/16/record-inflation-fed-outlook-wealth-effect/

[bucolic_frolic]

1. They sponged up the bulk of QE1-2-3-Bernanke-Powell

Asset bubbles are hidden wealth until you spend them, even if you do hide them in portfolios, housing stock, crypto, or NFT's. The chickens have come home to roost.

[LisaM]

2. Even if you're not super deep-pocketed, you can help.

I was in one of those pointless online arguments with people from my high school recently and suggested we could curb consumption on gasoline the way our families did during World War II and said that I had been walking to the grocery store (I know everyone can't do this but most people can cut back on gas). I feel as if I must have a scored a point because the loudest voices dried up. They all want to use their huge trucks to go on fishing trips every weekend and would rather blame Biden for the price of gas than curtail their activities at all, but they are also the people who love to reference the people who lived through WWII as the greatest generation and can't deny those people were willing to ration their gas use to help out.

[Auggie]

3. +1

[Hugin]

4. I had the realization...

That I personally hadn’t bought more than a half dozen tanks of gasoline for my car since March of 2019. That was shocking because prior to that I would fill up approximately three times per week.

Now I only drive to situations which require my physical presence.

Granted I get quite a few deliveries. Even counting those, my carbon footprint is a fraction of what it once was. I am rarely the only customer receiving goods on one of these runs. That has happened twice over two and a half years. Once due to a mis-click in a shopping app and another time a district manager brought my order out in a cute little UPS truck. The second I think is because she wanted to get the hell out of the office and that was as good of an excuse as any.

[betsuni]

5. Yes! I walk to the grocery store. Today one hour round trip, other places two or three hours.

It would be nice if people saved money if they can, a sense of thrift. I admired the old women in my hometown who had gardens in their backyards, pickled and preserved food, sewed clothing and quilts and knitted.

[LisaM]

13. All those things help out.

It just occurred to me to mention that during WWII, people were willing to do their part to curtail gas use in particular. Gas prices are now at a high because of a war and I see Ukraine flags blossoming everywhere. Seems to me cutting back on gas would actually hurt Russia and help Ukraine.

[yardwork]

11. Good work!

I've also noticed that some of the conservatives who want Biden to "do something!" to defend Ukraine are unwilling to admit that gas prices are affected by sanctions on Russia. They seem to want Biden to start WWIII with zero inconvenience to themselves.

The hypocrisy and childish self-centeredness is appalling. How can a democracy survive when so many of us are this misinformed and selfish???

[MichMan]

6. If they were already rich in the first place, why would they start spending more ?

because the value of their portfolio increased?

[BobTheSubgenius]

9. I could see a trigger point being a factor in that behavior.

If my liquidity topped, say, $2M, I'd be a lot more comfortable with some luxury and even a little decadence. As it is, luxury and/or decadence fall outside the spending limits we live with. If I only knew how long the money had to last...

[yardwork]

10. They're spending more in the U.S. because they're traveling less.

People who used to go to resorts and on cruises several times a year stayed home and bought new boats, installed pools, added on decks and new wings to their homes, bought new furniture, had big catered parties, rented huge tents, hired bands. They bought new electronics - in-home movie theatres, outdoor sound systems, etc.

They have even more expendable money than before because they're traveling less. Their retirement portfolios spiked in value and their homes are worth millions now. Their jobs are secure.

But the media blames it all on Biden. People need to wake up.

[Lovie777]

7. 3 and 6 of the Seven Deadly Sins . . .

#3 - Gluttony, is an inordinate desire to consume more than that which one requires.

#6 - Greed, is the desire for material wealth or gain, ignoring the realm of the spiritual.

Musk recently said: "Upcoming recession is actually good thing . ."

[yardwork]

8. This feels accurate to me.

And, those wealthy spenders are happy to blame inflation on the Democrats, to help ensure that Republicans get back in power and roll back taxes and regulations even more, allowing the obscenely rich to become even richer.

[Baitball Blogger]

12. But, but what happened to the trickle down theory?