What Inflation Damage?

Despite all the emotional outcry about inflation, there is actually very little key economic carnage to point to in its wake.

Historically, major inflationary surges have caused considerable and easily noticeable damage across key metrics of the U.S. economy. Amazingly, the post-pandemic inflation spike (one of the biggest in post-war history based on the magnitude of the rise in the inflation rate) oddly resulted in very little fallout -- at least on the economy’s major performance benchmarks.

I’m not suggesting the recent rise in inflation wasn’t significant or doesn’t matter. Like most consumers, I’m also frustrated by how much everything has gone up in price during the last few years. Any yes, I realize stocks suffered a bear market in 2022 and bond yields have risen significantly. Nonetheless, as demonstrated below, compared to historic norms during past inflationary instances, the damage inflicted to arguably the four most important measures of economic health were quite minimal. Indeed, hardly even noticeable!

Despite all the emotional outcry by policy officials, investors (including myself), consumers, politicians, and media representatives about the terrible evils unleashed by allowing inflation to surge after the pandemic, there is actually very little carnage to point to in its wake. How could the U.S. have the consumer price inflation rate soar from essentially 0% to over 9% in just two years and not have some detectable fallout among its key economic metrics? I don’t know! But it’s worthy of consideration.