Longtime Ag Economist Says Sustained Inflation Not Likely

WASHINGTON, DC – As more economists warn about the pending threat of sustained inflation, one agricultural economist suggests the fear may be unwarranted.

Bob Young is President of Agricultural Prospects and says to return to the inflationary period of the 1970s would require some major component of the economy to experience a sustained price increase.

For example, Young says, when gasoline prices increased more than 300 percent in the mid-70s, Americans were spending a larger proportion of the family budget on energy. Today, however, it’s a different story.

According to the U.S. Energy Information Agency (EIA), energy use per dollar of real gross domestic product hit 13.7 thousand BTU in 1970 but today is only 5.2 thousand per dollar of real GDP. So even though energy costs still total 5 percent of consumer spending, it has less effect on the overall household budget.

Young does warn however that labor costs would be the most likely factor for driving inflation in the near future. With fewer entry-level workers to fill the needed positions, labor costs are likely to increase thus driving overall long-term price increases.

He reminds those in agriculture who often quote the phrase “nothing cures high prices like high prices” to expect that truth to remain self-evident as this debate will be a distant memory in less than 12 months.
(SOURCE: All Ag News)