Inflation In The United States Essay

Inflation Causes in the U.S.

The first cause of inflation is that the natural growth of world prices for raw materials and energy always provoke an increase of cost inflation. A major role in the development of inflationary processes is provided by external economic factors. They appear when the country is actively using imported goods. Import prices not only "push" the prices of national products, but also increase the cost of production using imported components, increasing the cost of the finished product. Conventionally, all goods and services in the U.S. economy can be divided into two groups - the import substituting and non- import substituting. The first group of goods in the United States is threatened with extinction because of the

But we see a real inflation in the group of non- import-substituting goods. As a result, there is a paradoxical situation of disparity in prices. For example, a small imported color TV (technologically complex and labor-intensive goods) can easily cost as much as the standard female haircut in a barbershop, and a visit to the dentist costs as 5-10 TVs. In fact, China has become the largest exporter of deflation, and its status is relevant not only for the US but for the entire world economy. The cheap Chinese goods allow to destroy inflation in other sectors where import is not possible. Thus, the cumulative rate of inflation looks relatively decent. For example, the US consumer price index (United States Consumer Price Index - CPI) shows a modest inflation rate, only about 30% for 10 years . And, although, of course, no one believe in the CPI figures and other statistical tricks of US financial authorities, even if we assume that the actual inflation is higher. Thanks to the Chinese. The cheapness of their goods saves Americans from higher spending, caused in addition to the effect of low-cost labor force by the fact that the Chinese Yuan is strongly undervalued against the dollar (4-5 times at purchasing power parity), which makes