After joining World War I, the US Government created the consumer price index (CPI) in 1917. Food price data was used to calculate the CPI beginning from 1913, a four-year period. From 1913 to 1919, inflation was uncontrollable, resulting in a collective total of nearly 98 percent.
The causes of inflation during those times were the rising costs of WWI, followed by the influenza pandemic in 1918. The government placed money into shipbuilding centers causing a significant rise in the CPI by the end of 1919. Inflation was even higher from 1970 to 1979, reaching 102.91 percent. The US has experienced inflation at different levels throughout history, including high, low, and calm points.
What is Inflation?
Inflation is an increased rate in prices for food, utilities, fuel (automotive), energy, shelter, and other goods and services. A rise in prices is conveyed as a percentage for each category. This means that the US dollar buys less than it did in previous years.
For example, during the 2020 Covid-19 pandemic, the government and Federal Reserve issued over $35 trillion into the economy. Although trillions of dollars prevented a recession, inflation increased because of supply and demand. There was too much money and low goods/services supply due to business closures.
From October 2020 to the end of September 2021, the unadjusted CPI for all goods and services reached 5.4 percent. It is up to a 13-year high in September, rising by 0.1 percent from August of this year. The increase came from the cost of shelter, food, and new vehicles. Food was at its highest percentage rate since December 2011, with an increase of 0.9 percent from August to September 2021.
Prices for transportation, medical care, and used vehicles remained stable. Increased money supply, the declining value of the dollar, and the supply chain are the causes of inflation today. Too many dollars going into the economy last year and this year and fewer goods caused inflation to rise higher.
Other causes of inflation include increased wages and federal government policies and regulations. Inflation has impacted the national economy as it has from 1917 to the present. Historical to the latest CPI and inflation data is essential in making economic decisions to improve the economy.