The Federal Reserve (FED) has been aggressively tightening its stance on interest rates in an attempt to fight inflation and keep the cost of goods from increasing too quickly. However, it is important to understand that the prices of goods have a natural tendency to inflate over time.
The History of Rising Prices
To illustrate this point, let’s look at the price of copper as an example. Copper has been used for wiring and plumbing, among other things, for many years. If we look at its price since the 1960s, we can see that it has consistently increased.
The FED’s goal is to even out these price increases rather than allowing them to spike like this. While this may help to keep prices more stable, they will still remain high. Companies and manufacturers also tend to hold onto higher prices once they have become accustomed to them, making it difficult for prices to decrease.
The Impact on the Production of Ground Beef
This trend can also be seen in the production of ground beef. The price per pound has steadily increased since 1998, and the FED’s efforts to slow this trend have only had a minimal impact.
The Decreasing Value of Money
Another factor to consider is the decreasing value of money over time. As the value of money decreases, the cost of goods will naturally increase. This further contributes to the rising cost of everything.
The Bottom Line
It is important to understand that the FED’s tightening stance may help to slow the increase in prices, but it will not bring them down. The cost of everything will continue to stay high due to a variety of factors, including the natural inflation of prices, the reluctance of companies to decrease prices, and the decreasing value of money.
