Draper: Explaining the roots, results of inflation

Everyone says that inflation is their top concern this year. Do they even understand what has and still does drive inflation?

As the pandemic cooled, everyone started buying everything they could get their hands on, causing shortages and supply chain issues. They also began putting large purchases on their credit cards. When there are shortages, prices always go up. As the amount of a person’s debt increases, then the Federal Reserve must raise interest rates to help stem the wild spending. But these days, neither the Federal Reserve nor the Biden administration has much control over inflation.

By 2021, the largest oil producers in the U.S. had aligned themselves with OPEC in keeping a cap on oil production — not because there was a glut of oil but to keep prices ever on the rise, as Americans came out of hibernation. Even though we are now the leading oil producer, we are not getting the benefits, as companies are putting the price increases in their pockets instead of investing in renewable energy.

Rent prices are also out of sight, and there are now antitrust suits against a lot of private equity-owned firms for price fixing. Good landlords do not raise rents above inflation when they have good tenants who take care of property.

Food prices have become the top concern. Do you know why?

Last year, droughts were so extensive in the Western states that cattle ranchers were forced to downsize their herds, as there was not sufficient feed. So, this year, you see higher beef prices. In the past two years, over 23 million chickens — mainly layers, producing much of the country’s egg supply — have been culled and destroyed in Iowa alone due to avian flu.

Several years ago, the orange-producing groves in Florida were hit with a condition called “greening,” destroying one of our most productive places for oranges for juice. Right now, the juice industry is in crisis mode, as Brazil, the South American agricultural powerhouse and exporter of orange juice, has experienced such excessive heat that it has encountered a 24% decline in production.

Drought in Europe is devastating olive harvests. Extreme heat and flooding in West Africa are causing cocoa plants to rot. Production of coffee beans in South America has been affected.

As you watch the drought and floods in our Great Plains, think of the wheat and corn that is destroyed and just how many products that will affect.

If you are building a home, you have encountered high lumber prices. Much of our lumber comes from Canada, and those wildfires have destroyed thousands of acres of timber trees.

As the heat keeps rising, and we see more droughts, floods, tornadoes, wildfires and deadly hurricanes from the use of fossil fuels, we will reach a point when there will be no way to produce enough food.

Doris W. Draper

Houston

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