One of the largest drags on the economy is rampant inflation. According to the latest numbers, consumer inflation via the Consumer Price Index was running 7.0 % per year in December compared to 1.4 % in December 2020. Producer inflation via the Producer Price Index was running at 9.8 % per year versus 1.4 % the previous year.
Producer inflation, since it measures prices for the final demand of producers, is an important factor when estimating future consumer inflation. Obviously, inflation for individual items was often much higher than these averages. Gasoline was 50.8 %, used cars and trucks 37.3 %, natural gas 24.1 %, beef 18.6 % and new cars (when you could find them) 12.0 % higher than the previous year.
The root causes of the current inflationary environment are many and varied. Easy monetary policies by the Federal Reserve and expansionary spending by government have been the most important. Other contributing factors have been increased demand with the lessening of pandemic restrictions, chip shortages and labor shortages. Labor shortages have been fueled by policies, which have increased payments to labor not returning to work and mandates which have caused vaccine-resistant individuals to quit or lose their jobs.
In the near-term, expect inflation to remain and accelerate. The federal government is unlikely to cut its excessive spending habits. The Fed indicated it will move to a tighter monetary policy by raising interest rates and cutting its balance sheet. The inflationary forecast for the medium term and longer term depends on future actions of the Fed. But even if adopted, monetary policy lags are long and varied — on average about six months before results are seen.
This Fed has, thus far, not created a lot of confidence in its ability and/or willingness to bring inflation down to a more normal 2-3 % levels. For months, it said that the higher inflation was transitory as they continued easy money policies and Congress continued to spend. Inflationary expectations are a large component of inflation. The Fed needs to be a credible deterrent with a firm commitment to reduce inflation and related inflationary expectations, regardless of the strong headwinds that are likely to develop. If inflationary expectations fall, inflation will fall much faster and the costs of reducing inflation will be much less.
The last year has been filled with trials. The enemy has attacked our bodies, our finances, our churches and our freedoms. Sadly, many have lost their lives. Others have lost their jobs. Many small businesses and some large businesses have closed or are close to closing. Empty shelves, car lots, theaters, schools, shopping centers and restaurants occurred too often. The United States is sharply divided with confidence in politicians, government institutions, the mainstream media and pharmaceuticals at or near all-time lows. Some might argue the kingdom of darkness has grown.
Although we could blame the president, Congress, China, Big Tech, the media or a host of other individuals and institutions, the Bible teaches that our battle is not against flesh and blood. It identifies our spiritual enemies as rulers, powers, world forces of this darkness and the spiritual forces of wickedness in heavenly places. Believers have a role to deter the enemy.
"For our struggle is not against flesh and blood, but against the rulers, against the powers, against the world forces of this darkness, against the spiritual forces of wickedness in the heavenly places," (Eph. 6:12, NASB).
We are told to put on the armor of God, which is the equivalent of saying "Prepare for battle." Civilians don't put on armor, so the command simultaneously calls us into God's army. Our armor protects us with truth, righteousness, the gospel of peace, faith and salvation. Scripture calls the sword of the Spirit the Word of God and it is the only offensive weapon mentioned in this scripture (see Eph. 6:13-17). We are well-equipped soldiers because our King and Lord has paid the price.
We are commanded to be strong in the Lord and in the strength of His might. With the armor or God, we will be able to stand firm against the schemes of the devil, to resist on the evil day and to stand firm. In other words, we are called to be a credible deterrent against the enemy.
"Finally, be strong in the Lord and in the strength of His might. Put on the full armor of God, so that you will be able to stand firm against the schemes of the devil" (Eph. 6:10-11).
"Therefore, take up the full armor of God, so that you will be able to resist on the evil day, and having done everything, to stand firm" (Eph. 6:13).
Dr. James Russell is a professor of economics at Oral Roberts University.
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