Why does everything seem so expensive right now

As the days get darker, so too does the mood in the UK as we head towards another punishing winter. Things are serious. Soon we started to regain some semblance of normalcy from the jaws of COVID – which is FYI, still around – From cost of life crisis Beat.

Today you can expect to spend a lot more on absolutely everything than you did a year ago because prices rise faster than they were in 40 years. The cost of food is rising along with the prices in stores 5.1 percent growth in AugustOr exclusively for fresh food, 10.5 percent – ​​the highest rate seen since 2008.

Meanwhile, the cost of keeping our homes warm has skyrocketed. Liz Truss promises to cut energy bills At £2,500 per year from 1 October to 2024 households could be prevented from paying £3,549, originally set by the Ofgem energy price cap, but it still means paying much more than we are paying are doing. For example, pre-payment meter customers will need to find £264 in cash for January’s energy, according to Sankalp Foundation analysis.

Apart from the cost of food and utility bills, the price of non-essentials is also climbing. Even the Panini Football Sticker Albums are not untouched by the price hike. Filling out the World Cup Album for Qatar 2022 price is around £870 . will beEach sticker pack is coming in at 90p, up from the 80p they cost for the Russia 2018 edition and 50p for Euro 2016. Thanks a bunch, inflation.

But what exactly is inflation, and how have we found ourselves in this hellish situation? We talked to experts to help us figure it all out.

What exactly is inflation?

Inflation is a general increase in the price level of something, says David Spencer, professor of economics and political economy at the University of Leeds.

Overall, UK inflation climbed above 10 per cent for the first time in four decades when it reached 10.1 percent in the year to July a little easier before 9.9 percent in August, Goldman Sachs predicted it could continue climb up to 22 percent subsequent years.

But, Morton O., professor of economics at University College London. There’s a significant difference between a cost of living crisis and inflation, says Revan.

“Typically, the way we think about inflation also includes the rate of increase in wages,” he explains. “What is going on right now is that the prices of the things we buy are going up, but not our income. What we can buy from our salaries is decreasing. Net inflation would also be going up in our salaries at the same rate. so it [situation we’re in] The cost of living crisis is higher than net inflation. ,

How is inflation calculated?

Inflation can be measured using a number of methods, but the most commonly used is the price percentage change over time of a sample of goods and services in a hypothetical.shopping basket,

“The contents of a basket are defined as the types of things people buy in the UK,” says Kevin Albertson, professor of economics at Manchester Metropolitan University. “Price changes are added together by weighting all individual price changes to determine how important those items are to UK consumers. For example, if we buy twice as much chocolate as carrots, the price in chocolate will increase.” Changes in carrots are twice as significant as changes in prices, and therefore have twice as much weight in combination with the composite index.”

Why is inflation so high now?

Several factors are at work here, including the high cost of food, oil and gas and other fuels. But as for the reasons behind it, Brigitte Granville, professor of international economics and economic policy at Queen Mary University of London, named the COVID pandemic and lockdowns, Russia’s war in Ukraine, the resulting economic sanctions and disruption of global supply chains among them. ,

Raven says the “Brexit effect” is contributing to the rise in prices in the UK as well. Brexit results in a falling value of the pound, which falls to a . done 37-year low last Friday, As the value of sterling goes down, the price of everything Britain imports is going up, explains Raven, and “the loss of value of sterling is feeding inflation in the UK”.

Granville explains the role of shortage of essential goods in rising prices and thus, inflation. “Economics is based on scarcity, so when something is scarce, it costs a lot of money because so many people want it.”

Albertson says the world in general is running short of resources, which means we have to ration what we have. The result is worrying. “As prices rise faster than wages, people who don’t make a lot of money are kicked out of the market, and so, those with the most money can buy what they want.” It’s obviously not very fair, but that’s the way the market works,” he says.

But I don’t have salary increment!! Why are wages not increasing in line with inflation?

The simple answer is that not all workers have the power to raise wages, says David Spencer, professor of economics and political economy at the University of Leeds. This is why many people face falling real wages. “At least in the UK, power is skewed to employers, not workers,” he says.

How will all this affect me?

Albertson’s previous comments may have already given you some ideas, but there is more.

“It’s going to be frightening,” warns Granville. “Previously, in the ’70s, we had what’s called wage-adjusted inflation, so wages were adjusted to inflation. It was bad because it meant you could never get rid of inflation, but at least Fewer people could have lived. Now we don’t have that. So what’s the point of that? It means literally, for example, let’s say you bought a kilo of sugar last week and it cost £3, Now the same kilo of sugar is going to be £10, but your salary hasn’t changed.”

Albertson agrees that most people in the UK will see their standard of living worsen in the short term, but he has some hope for young people. “In the long term, younger people have a longer run than people my age, and we can expect things to get better,” he says. “That’s because technology can improve the efficiency of the energy we can access. That is to say, we may need less energy to maintain our quality of life.”

But it requires action, and now.

“The way governments got involved in the search for a COVID vaccine, governments need to take the lead in developing sustainable technology,” says Albertson. “In the meantime, they must also take the lead in making sure that the people who need the most help get the most.”

How am I meant to live like this, exactly?

In short, do it as simply and permanently as possible, Albertson says.

But, ultimately, the responsibility of the regular people on the ground to resolve this situation does not really lie with us. Revan says: “It is up to the treasury and the chancellor to intervene in policies that allow people to settle down anyway. It would be special tax policies and better income distribution for poor people. if we spend on [ensure quality of life] For poor people and to beat inflation, therefore it is better to introduce targeted policies. ,

How did we get into this mess?

Albertson points to governments around the world and how they have bought into the idea that economic growth can be sustained forever. But it is not strictly realistic without action.

“Given that we have a standard stock of resources, this always requires better technology,” explains Albertson. “Recently, technological improvements have not been enough to reverse the decline in our resource stock. Therefore, for the current level of production, demand exceeds supply.”

Is there any hope?

There is always hope, Spencer reassures. “The economy can be improved in ways that allow the majority to flourish,” he says. “We have gone through inflationary phases in the past. The key is to ensure that low inflation is not at the cost of high unemployment.”

@emilysgoddard

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