Inflation is climbing
There’s a long list of uncertainties in the economy right now that’s affecting all of us. The prices of everyday “Goods & Services” are going up by the second. We’re all now paying more at the gas pump. We’re all now paying more for groceries and just about everything else we need.
These increases in Prices of just about everything we need in our daily lives is currently being caused by Inflation.
The definition of Inflation is very simple………..it’s the “Expansion of the Money Supply”………be it M1, M2 or M3.
The Federal Government is currently reporting that prices as of July 2021 have risen by 5.4% since July 2020, although many of us might wish to disagree that this “Number” is much to low
Many people confuse “Inflation” with the “Law of Supply & Demand”, often referring to Rising Prices as Inflation, which is the ONLY possible result of Inflation, but under the Law of Supply & Demand, prices can go either up or down, depending on whether supply exceeds demand or demand exceeds supply.
Unfortunately, with Inflation prices of “Goods & Services” only go one way…………..UP!!!!!
Currently the “Government” is just handing out “Free Stuff” to so many people it’s just unbelievable. In a Capitalist System everyone is free to “Act & Interact” with anyone of one’s choosing, and in a manner that benefits all parties.
If a person or business is offering a good or a service at a price that provides the person or business a reasonable profit, and a consumer is willing to pay the price asked, then both Seller and Buyer are free to transact business which satisfies each party’s needs.
The outcome from the Transaction results in the value of the “Products & Services” added to the economy’s GDP (Gross Domestic Product).
In the situation above, both sides of the “Economic Equation” are balanced, which means, the Seller receives a “Profit” from the “Products or Services” provided, and the Buyer receives the desired “Products or Services”. Something is created for the money spent by the consumer.
But when the Government goes out and “Borrowers Money” or “Prints Money” and then just gives out “Free Money” to people who are Not required to produce “Products or Services” to trade for the money received, then this situation results in too many dollars chasing to little products or services………..which results in Inflation!!
The bad news is that while Congress is operating is such a reckless manner, there is very little that can be done to offset the damage Congress is doing to the economy.
The Federal Reserve Bank does monitor “Inflation Trends” as one of the numerous “Economic Indicators” they track on what’s happening with the overall economy. It’s been agreed to by economists that a target inflation rate of 2% is considered acceptable for maintaining a stable economic environment over the long run.
The Federal Reserve Bank can slow down the economy by either raising Interest Rates or reducing the Money Supply.
Actions taken by the Federal Reserve Bank are referred to as Monetary Actions. When the Federal Reserve Bank determines that the economy is Overheating, they can raise Interest Rates. Since so many “Goods & Services” are dependent on the end “Purchaser/Buyer” needing to obtain financing, such as buying a car, buying furniture, or buying a house the extra financing costs tend to reduce excess demand.
On the flip side, if the economy is faltering or is in a recession, then the Federal Reserve Bank can reduce the then current interest rates, thus reducing the financing costs for “Goods & Services” with the intended result of hopefully stimulating the economy.
In today’s world there are troubling “Political Actions” emulating from Congress that can and will cause nothing but financial problems for all of us. The mood in Congress right now it to just give out “Free Stuff” to just about everyone and doing it by either “Printing Money” or “Borrowing Money”, which both result in diluting the value of every dollar that’s in circulation, including the “Dollars” we’re all currently holding.
If the Federal Reserve Bank attempted to Reduce the Money Supply, it would prove be a futile attempt as long as Congress is determined to continue Printing Money or further Borrowing Money in a quest to keep giving out Free Stuff to people who were Not required to produce any “Goods or Services” in return for Free Money they receive from the Government. 
The really bad news is that if the Federal Reserve Bank does go and raise interest rates to try and reduce demand, it would have little to no effect on the Rising Prices for “Goods & Services” caused by Inflation that are mostly purchased by all of us in cash, such as items purchased at the Market.
But if the Federal Reserve Bank did decide to raise interest rates it would directly affect the borrowing costs for the companies that produce the items that we all purchase at the market, and the additional costs will just be passed through to all of us………..increasing prices further.
We’ve all heard in the news how much the price of Lumber has increased in the last several months, in addition to just about every other building material that is needed to build a house. All the additional costs to the builder will be included in the price of the house that a buyer will be required to pay.
While inflation rates don’t have a direct effect on mortgage rates, there can be indirect effects due to the way inflation influences the economy, the actions taken by both Congress, the Federal Reserve Bank and the behavior of everyday Americans.
The demand for “Goods & Services” is currently up and supply chain disruptions and worker shortages are making it hard for companies to meet consumer needs. This has resulted in steadily rising prices.
We request that everyone contact their Congressperson or Senator and tell them to stop acting in such an irresponsible manner and further encourage them to return to managing our economy in a responsible manner.
We’re happy to hear from those that agree or even more so, disagree with our above position at:
E-Mail: info@westarlending.com
Office Phone: (888) 797-7970
