MICHEL MARTIN, HOST:
Inflation is at a three-year high. And yet, under the leadership of its new chair, Kevin Warsh, the Federal Reserve did not raise rates this month to help cool the economy down. Our colleagues from The Indicator podcast, Darian Woods and Wailin Wong, ask if inflation is here to stay and, if so, what that means for Americans.
DARIAN WOODS, BYLINE: Mark Blyth is a political economist at Brown University. He's the co-author of "Inflation: A Guide For Users And Losers."
WAILIN WONG, BYLINE: We wanted to know whether high inflation could be the new normal.
MARK BLYTH: I firmly fall into the we're going to be higher for longer, if not permanently camp.
WONG: Permanently camp? No thanks.
WOODS: Yeah. So Mark backs up that somewhat bleak prognosis by saying that the last 30 years were unusual.
BLYTH: Combination of China and Eastern Europe joining the global workforce, pushing down wages and pushing down prices.
WONG: Also, basically since President Gerald Ford in the 1970s, it's been the norm for presidents to back away from pressuring the Federal Reserve. That's contributed to low inflation. But that norm obviously ended with President Trump.
BLYTH: And ultimately because of the container ship, the IT revolution, globalization, all of which were pushing down on prices. And all of those things are either going into reverse or coming to an end. So I think it's kind of inevitable. Add climate change into this as a series of supply shocks that are probably going to get more prominent, and you have all the ingredients you need for sustained higher inflation rates.
WOODS: So if we are in an era where the value of our money just crumbles each year, Mark says this doesn't hit us all equally.
BLYTH: The story we like to tell each other that we all suffer from inflation simply isn't true because it varies across the income distribution. I like to say to people, if you shop at Whole Foods, you're impervious to inflation because you've been paying 30% more for your groceries than you ever should have. Now, if you're a single mom juggling two jobs and you're shopping at Dollar General and prices go up by 5%, you've got to make some serious choices.
WOODS: So that's the broad picture. If you have more money, you can afford to make more choices. But going into specifics, one winner from an inflationary shock, Mark says, is someone who has a large mortgage on a low fixed interest rate. Because as inflation gets higher, the value of that mortgage decreases. Inflation is generally good for borrowers with existing loans.
BLYTH: That's why all the boomers have huge houses.
WOODS: He says that's basically because many of them got a fixed-rate mortgage before the high inflation of the 1970s.
WONG: Mark says another winner is someone who has their savings in the stock market. That's because in Mark's view, a lot of companies can quickly jack up their prices in an inflationary shock, and that raises those share prices.
WOODS: In all, though, when it comes to inflation, the majority of people will be losers. Mark says it succinctly.
BLYTH: In shorthand, I just say the bottom 80%.
WOODS: The bottom 80% of the income distribution.
BLYTH: And really, the bottom 40% are the ones that really, really suffer this because they don't have much in the way that they can augment their incomes. And if you're already juggling two jobs that are, like, low pay, then you're in real trouble. The top 20%, they're inflation-protected. Everyone else isn't.
WOODS: But I can go from Whole Foods to Aldi. Somebody's going from Aldi - they don't have a lot of places to go.
BLYTH: Yep.
WONG: Wailin Wong.
WOODS: Darian Woods, NPR News.
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