“Wish I had me some money, I’d buy me some better luck.”
Jeezy
These terms are thrown around a lot, but they’re unique and pretty much suck in their own way.
We hear about inflation from politicians all the time. We sometimes hear about stagflation when the economists want to chime in. And recession is the dirty word the politicians who aren’t in power use all the time. But what do they mean?
INFLATION
Inflation is a rise in prices, which can be translated as the decline of purchasing power over time.
INVESTOPEDIA
Inflation is primarily driven by the influx of money or similar currency into a financial system. Civilizations have lived through eras of inflation since ancient Rome, ancient China, medieval Egypt. And it’s been the same the whole damn time.
The increase of what can be spent to buy goods must be counteracted by the cost of goods rising. Let’s say a gallon of milk cost $2.00 in 2018. When COVID-19 hit and the government started sending stimulation checks, they basically inundated us with more money that they printed. We rushed to spend on necessities like milk or clothes. That increased demand without matching supply which likewise increased the price of all of it. So, a gallon of milk today can cost as much as 2x the price in 2018. All of this happened so rapidly that consumer spending outpaces the ability for economic production of things like milk or textiles. That, Dad, is inflation.
STAGFLATION
Stagflation is a condition in which slow economic growth (stagnation), rising prices (inflation), and rising unemployment all happen at the same time.
FORTUNE
Stagflation is awful. The Stagflation stew requires poor government monetary policy and a shock of the supply chain, namely in the energy supply chain. We went through this during the Great Inflation from 1965-1982, and it’s foolish to think we may follow suit some 40-60 years later. In 2022, inflation rates were increasing but we weren’t yet in a recession. Gas prices briefly skyrocketed, then settled and unemployment was low. Stagflation continues to be an idea in the new era of economic theorem.
SHRINKFLATION
Shrinkflation is the practice of reducing the size of a product while maintaining its sticker price.
INVESTOPEDIA
Another doozy. Chips, toilet paper, and chicken wings have all been downsized over the years. Said to be driven by impending inflation, these shrinkages are common practice for large companies and conglomerations, like PepsiCo, Kimberly-Clark and Domino’s (to name just a few). This can help increase margins that may otherwise shrink themselves in the midst of inflation and recession. However, this practice can backfire when noticed, especially for popular, seasonal goods. The diminishing size of Cadbury Mini Eggs caught the ire of fans worldwide, even with a slight reduction in cost in the product. Be on the lookout in the supermarket primarily for shrinking package sizes of cheese, paper goods and snacks.
RECESSION
“The National Bureau of Economic Research (NBER) Business Cycle Dating Committee—the official recession scorekeeper—defines a recession as ‘a significant decline in economic activity that is spread across the economy and that lasts more than a few months.’
Whitehouse.gov
Whether you’re 26 or 86, my man, we have seen these often. The history of recessions in the U.S. is as consistent as a Russ Westbrook triple double. We saw 12 in the 20th century and three so far in the 21st century (per Balance). The 21st is pacing way ahead of the 20th century if you’re keeping score.
We’ve had a lot of time to learn about recessions and we’ve been able to prepare for them. But, like an earthquake, we can anticipate and beat them. We just have to get through it the best we can. People think it’s the inept government or predatory Wall street assholes pushing the country into crappy circumstances (they’re no heroes or victims) but it’s an actuality of capitalism.
Let’s look at the most obvious example: the COVID-19 pandemic. No one could’ve planned for COVID-19 pandemic. Sure, the Trump administration gutted the CDC, which may have set us up for even greater failure. However, we were headed for a significant decrease in economic activity due to the virus if every other country in the world was a signal. There’s no doubt: every country plunged into a recession because of the pandemic.
Recessions are triggered by instability and eras of contraction vs. growth. Is that much more different than the life of a father? We grow, we slide back, we face seemingly insurmountable instabilities, we grow again. Our economy and its inflation, stagflation, shrinkflation, and recession is just a monetary or economic representation of ourselves.
Next time we hear someone talk about inflation, stagflation, shrinkflation or recession, let’s ask ourselves: are we going through or growing through it?
