WE ARE NOT ALONE

President Biden concedes that his top economic priority is, or ought to be, inflation, currently at 9.1%. Biden, an accomplished politician, frames the discomforting news within a package of positive economic developments: "Unemployment is near historic lows." His administration "cut the federal deficit by 1.7 trillion this year." "Millions of Americans are moving up to better jobs and better pay." "The job market is the strongest it's been since World War Two, adding 8,700,000 new jobs" since he took office. Nevertheless, the president concedes that inflation is a real challenge for American families. However, he suggests that America can tackle inflation from a position of strength unlike any other region in the world. He wants us to recognize that "every country in the world is getting a big bite of this inflation - worse than we are in the vast majority of countries." While it is certainly true that an overwhelming majority of states are suffering significant inflationary pressure, blanket statements that every nation is worse off than we are is a grossly exaggerated assertion. Not only do many comparable economies report various rates of inflation, many differ in the significance of what sectors are mostly impacted. The reported rate of inflation in the 19 states that compose the Eurozone currently averages 8.6%. In Europe as a whole, in part because of individual countries' relative dependence on self-imposed scarcity of Russian fuel, rates run the gamut from 3.4% in Switzerland to 78.62% in Turkey. Aside from these significant outliers, countries that are geographically closer to Russia tend to have notably higher rates of inflation. Ukraine, predictably, comes in at 21.5%, Estonia at 20.1%, Lithuania 18.5%, Poland 15.6%, Hungary 11.7% and so on. While a number of western European states report rates on par with what the U.S. has endured - Spain 10.2%, Belgium 9.65%, and the U.K. 9.1%, Germany and France, respectively the fourth and fifth largest economies in the world, compare positively to our numbers. France, especially, at a "paltry" 5.8% is a statistically shining example. France's rate of inflation illustrates the correlation between energy resources and their effect on domestic malaise. It uses nuclear power, which accounts for 70% of the country's electricity production and 40% of its overall energy consumption. This makes the country less vulnerable to shocks of gas prices. The European Central Bank is actually forecasting that France's inflation rate will drop significantly during the next few years. Switzerland's low inflation rate seems to be partially due to its existing cost of living, which is already very high. Prices for household goods in Switzerland are generally about 60% higher than those averaged in the surrounding European Union countries. Besides, its politicians have aggressively legislated to tackle prices, energy mix and wage restraints. Turkey's inflation is an entirely different issue. Analysts claim that, because of President Recep Tayyip Erdogan's long running unorthodox strategy on monetary policy, inflation rates have soared. Food prices have risen 91.6%, energy costs are off the charts, and economists predict that the situation is bound to get worse. In many Western European countries rates hover around the levels we have experienced recently. However, a number of countries have taken pro-active steps to protect the impact on their citizenry. Some imposed caps on energy prices, or provided rebates for low-income households to offset the cost of gas and diesel. Germany effectively reduced the price of gasoline at the pump and is offering monthly $10. tickets for public transportation. By keeping gas prices at $6.90 per gallon, it effectively undercuts the rest of Europe, where prices fluctuate between $8.50 and $10.00 a gallon. What are we complaining about? Outside of these countries inflation rates are somewhat of a mixed bag. Australia and New Zealand, while experiencing rates historically high for their economies, report considerably lower rates than in the U.S. and E.U. Australia came in at 5.1% year-to-date. New Zealand is now up to 6.9% - a 30 year high. India shows a 7.01% rate. But across Africa the average has soared to 12.2%, not helped by 245% in Sudan and 90% in Zimbabwe. China, the world's 2nd largest economy, has managed to keep its rate under control at an acceptable 2.2%. This remarkable percentage may be due to a plunging domestic demand caused by its zero-Covid policy, and because the country is largely self sufficient in food. The fact that it may have a competitive negotiable advantage on the energy market, as much of the western world is drastically reducing Russian fuel imports, doesn't hurt either. All in all a diverse assortment of outcomes. President Biden is essentially correct. We are not alone. But when we compare our situation to that of the rest of the world, we should be selective, and figure out if some of these economies are adopting strategies we could benefit from. Inflation will likely stick around for some time to come. Former Secretary of the Treasury Larry Summers cautions that inflation rates are unlikely to fall without a significant economic downturn. Fasten your seat belts! Theo Wierdsma