Jonathan Clements's Blog, page 254

Tailor Made

EACH OF US IS UNIQUE.��That���s how our friends instantly know who we are. In ways large and small, we differ from others in appearance, in the sound of our voice, in our age, stature and politics. Our life experiences differ greatly. Our fears and anxieties differ, as do our aspirations.

We are different financially, too. Our incomes vary, sometimes greatly. So do our savings. Some of us have inherited wealth; some none. Some of us feel a strong responsibility for others. Some support the institutions, such as churches, schools and colleges, that helped develop their values, skills and sense of community.

These differences matter. They define who we are as individuals.

That raises an important issue: Why do financial companies continue to emphasize such generalities as ���invest your age in bonds���? Sure, most people can take more investment risk when young. Future earnings, and more savings, can make up for early losses. But is this enough reason to justify this rule of thumb? I doubt it. To clarify my proposition, consider how I invest and how my mother invested when she was alive.

First, although our portfolios had remarkably different asset mixes, I believe both of us got the decision right. Here are our percentages:

Mom: Stocks���0%. Bonds���0%. Cash���100%.

Me: Stocks���100%. Bonds���0%. Cash���0%.

You might well say, ���How can such extraordinarily different asset mix decisions both be right?��� Let me explain, and I bet you���ll agree that both Mom and I got it right. We matched our unique situations with an appropriately unique solution. Start with me. I���m in my mid-80s. I like saving and I don���t like spending on luxuries.

Financially, I���ve been fortunate. I���ve enjoyed investment success, particularly with Berkshire Hathaway since the mid-1970s. I���ve held a 100% stock allocation during a favorable market. I���ve also enjoyed a relatively high earned income. Even more fortunately, I continue to earn enough in my chosen career. When combined with required minimum distributions from my 401(k), it covers our annual expenses as a family.

Realistically, I���m not investing for my wife and me, so much as for my adorable grandchildren. Their time horizon for investing���the time between now and when they will want or need to spend the money���is very, very long. It could be at least 50 years. Anyone investing for 50 years would do as I do: 100% stocks.

Now, let���s look at Mom���s decision. My father���s parents died in the late 1940s and left a modest inheritance to my father. As a lawyer, he knew that he could ���disclaim��� the inheritance and pass that money on to his four children without any tax owed. Mom and Dad discussed it and agreed that Dad���s income was enough for them. What they most cared about was giving their four kids a good college education. Combined with summer jobs and contributions from Mom and Dad, this modest inheritance from his parents would cover the cost of four college educations.



Now, how to invest the inheritance? Mom and Dad had seen the awful impact that the 1929 market crash and Great Depression had on stocks, so that was out. Interest rates were being kept low by the Federal Reserve, so bonds were unattractive, particularly after inflation���s toll. Mom considered putting the money in a savings bank, but she knew from experience that banks could fail. At that time, savings account passbooks all said that the bank reserved the right to defer withdrawals for 28 days to assure liquidity. Mom knew that banks could implode in a lot fewer than 28 days. The upshot: She put the money into a checking account, where she could always take it out immediately.

You may well be wondering, ���Why did this make sense?���

Mom grew up in the Deep South, where her father practiced law in a small city. Cotton prices were low in the 1920s, and many cotton farmers suffered. So did lawyers whose clients depended on cotton. They went broke together. Mom���s father could not pay the tuition for college. Fortunately, Mom was able to borrow the needed money from her sorority. To pay off that loan, she typed papers at six cents a page and made little girls��� dresses for $1 apiece. It took 15 years to clear her college debt.

Mom knew that the most important goal in our family was a good college education for each of her four children. And she knew that the moderate inheritance from her in-laws would be enough. The possible upside of having more than enough mattered very little, while not having enough would be a life-changing nightmare. Because she defined the problem correctly, Mom was able to figure out the right answer, which was to be 100% cash. All four of us went to great colleges, and that has made all the difference.

Rules of thumb can get many of us started in the right direction. But getting started and getting it right are different. Each of us is different from all the others. Since our financial situations differ, too, shouldn���t our best answers be custom tailored to our own unique realities?

Charles D. Ellis is the author of 18 books, including Winning the Loser���s Game,��which is now in its 8th edition, with 600,000 copies sold. Charley has taught investing courses at both Yale and Harvard business schools, and he served for 17 years on Yale���s investment committee. Check out his earlier articles.

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Retirement Pro

I���VE AWARDED MYSELF a professional designation: CER, or Certified Experienced Retiree. In the dozen years since I left the workforce, I���ve learned a great deal about retirement. I���ve grappled with the financial aspects, how your relationships with family and friends evolve, and how your outlook changes over time.

One key lesson learned: A steady income stream provides peace of mind. In my case, it���s from a pension and Social Security. For younger retirees, it could mean drawing savings from a 401(k) or IRA, plus Social Security. But I���ve also learned that retirement finances are a lot more than cash flow.

You need to diversify the source of your funds. This means having taxable investments plus cash for emergencies, market dips and to counteract inflation. A pension is great, but my monthly payment hasn���t changed in 12 years���and it never will. I use dividends and tax-free interest to counteract the effects of inflation.

You also need to cover not just basic living expenses, but your total spending. You���ll want to spend some money on fun and some on other people. Then there are donations to make and extra activities to undertake.

Living on a detailed budget based only on necessary expenses won���t provide you with enough money���and it wouldn���t be much fun.

As with your working years, unexpected stuff will happen in retirement. In our case, an errant baseball caused my wife to lose sight in one eye. We had to adjust, meaning I do more driving for her.

Then, my old employer dropped our retiree health and dental coverage. It gave us a health reimbursement arrangement instead. Now, we have to choose insurance plans on our own. We���re dealing with premium inflation, plus higher prescription costs, than we had under our old plan. Many of my fellow retirees are struggling financially with the change.

Some people worry about all the free time they���ll face in retirement. What free time? My days are full. I read, write, draw, walk, cook, shop, spend time with grandchildren, golf and travel.

True, it isn���t easy letting go of a job that you enjoyed and gave you status. After all these years, I���m still unofficially involved in helping fellow company retirees with their benefits through several Facebook groups.

In my experience, most work-related friends and colleagues fade away. Perhaps more disturbing is seeing others, like your former dynamic boss, cope with Alzheimer���s. It���s depressing. It���s important to make new relationships in retirement. I struggled with that, but finally found golfing buddies.

At age 78, I occasionally think about the future. Have I planned it all correctly? Of course, there are many things to think about when planning to retire. But remember the fundamentals. No matter what, without adequate income, retirement will be stressful.

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Refinancing���Again

I HAD A NEW HOME built in 2017. I financed it with a 30-year mortgage at a 3.875% interest rate.

Early last year, when interest rates dropped due to the pandemic, I suggested that readers refinance. I took my own advice, replacing my 30-year loan with a 15-year mortgage at 2.99%. The cost of refinancing seemed well worth the reduction in my loan interest rate.

Two months ago, I saw that mortgage rates had continued to decline, so I refinanced again. My existing mortgage company gave me a new, 15-year loan at 2.375%. I didn���t want to pay the upfront costs to refinance, but I didn���t have to: My current lender waived them because I was already a customer.

For those keeping score at home, the interest rate I pay has fallen 39% over the past four years. I started with a low-rate mortgage���and wound up with one that���s rock-bottom.

Readers may wonder whether I should pay off my mortgage entirely. I���ve decided I���d rather have more liquidity���by keeping more money in cash. True, my cash account pays just 1.35%, a lower rate than I owe on the mortgage. But I see my savings as insurance against an emergency. On top of that, with a healthy cash balance, I won���t be tempted to draw on the equity in my home for some big expense.

No one knows if and when interest rates will rise again. But I���ve locked in low rates for the duration. If short-term rates do rise, my mortgage payment won���t change. My cash account, however, may pay me more money.

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Forever War

THE ABOVE HEADLINE doesn���t refer to Afghanistan. Even that 20-year struggle has finally come to an end. This is about an even more relentless campaign���against the cable company. In my case, that means Spectrum, part of Charter Communications.

The first question is, why haven���t I cut the cord? The short answer: My wife loves sports on TV and cable seems to be the only way to get all her favorites.

As cable victims know, after those enticing ���new customer��� deals expire, you���re subject to a constant series of escalating fees, which can quickly have your monthly bill skyrocketing. There���s only one remedy, I���ve found, and that���s constant negotiating.

As soon as I see an increase in my bill, I examine it. If it���s just an increase in the cost of a standard component, I���m probably stuck with it. But the more substantial increases come from the expiration of whatever promotions I currently have.

The next step is calling Spectrum and telling the robot I want to cancel service, which gets me to ���Customer Retention.��� Once there, I explain to the rep that I���m willing to remain a customer, but only with enough new promos to get my bill back to where it was.

I���ve found that some reps really try to help and others have a bad attitude from the get-go. When I get the latter, I usually just claim a bad connection and spin the wheel with another call.

It takes time on the phone and persistence, but I can usually get my bill back close to where it was���and occasionally even a little less. It���s crucial to take good notes, including the name of the rep, because often my next bill doesn���t jibe with the new discounts I���d been promised. That means yet another phone call is needed.

Not long ago, I spoke with a friend who didn���t know negotiation was even possible, and probably wouldn���t bother with it anyway. His monthly Spectrum bill was $75 higher than mine for the same services.

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Save for Tomorrow

SOCIAL SECURITY benefits are fairly modest���the average retiree receives $1,555 per month or $18,660 a year���but they���re a vital source of retirement income for countless retirees. Today���s burning question: How can we shore up the program���s finances?

It���s estimated that Social Security provides some 30% of the income for the elderly and that nearly nine out of 10 people age 65 and older receive benefits. Social Security is even more important for women, 42% of whom rely on it for half or more of their income.

Unfortunately, the Old-Age and Survivors Insurance (OASI) Trust Fund, from which Social Security benefits are paid, faces imminent shortfalls. The fund���s reserves are projected to be depleted by 2033, at which time continuing tax revenue will be sufficient to pay just 76% of promised benefits.

There are no easy solutions. Both higher payroll taxes and lower benefits may be necessary. But how about some out-of-the-box thinking? Meet my suggested solution: the Save for Tomorrow program.

The program would cost the federal government very little in the short run but save it vast sums in the long run. It involves the creation of a novel, completely optional retirement account. Here���s the basic framework:

Parents, grandparents or legal guardians could opt to open and fund a Save for Tomorrow account for their children or grandchildren. The account would be triple tax-advantaged���contributions would be tax-deductible, funds in the account would grow tax-deferred and future withdrawals would be tax-free.
Contributions would be subject to a lifetime limit for each child���say, five times the annual IRA contribution limit. For a child born today, that would mean contributions would be limited to $30,000, equal to five times today���s regular $6,000 IRA limit. Contributions could begin at birth. The contribution window would close once the child reaches age 10.
Between ages 65 and 70���and no sooner���the beneficiary could claim her benefits. At that point, the funds in the account would be annuitized, with inflation adjustments, just as Social Security payments are. The beneficiary would then receive the higher of the annuitized income stream from her Save for Tomorrow��account or the standard Social Security benefit. If the Social Security benefit is higher, the funds in the Save for Tomorrow account would be turned over to the OASI Trust Fund.
Save for Tomorrow accounts would be overseen by salaried professionals and would reside inside the highly regarded federal Thrift Savings Plan. Given the super long time horizon���anywhere from 55 to 70 years���the funds would be aggressively invested, with nearly 100% in stocks.
Upon a beneficiary���s death, any unused funds in the Save for Tomorrow account would be turned over to the OASI Trust Fund.

Let���s run some numbers to see how this new program might work. I���ll assume the Save for Tomorrow��account earns a 7% real return over its lifetime. For simplicity���s sake, I���ll also assume the account is funded by a lump sum contribution at birth. Finally, I���ll use the 4% rule to annuitize the account balance at ages 65 and 70. You can see the results in the accompanying table.



Some observations:

Contributing $6,000 at birth (scenario No. 1) generates an annual payout of $19,505 at age 65. This is higher than the average Social Security benefit of $18,660 that I referenced earlier. By waiting until age 70, the payout increases to $27,357 a year.
For comparison purposes, the maximum Social Security benefits are listed in the table. Obviously, many retirees will receive far less than these numbers.
Contributing $12,000 at birth leads to annual payouts of $39,011 and $54,715 at ages 65 and 70, respectively. Both of these top the current maximum Social Security benefits.
The annual payouts are in real, inflation-adjusted dollars since I���m using a 7% real return for the calculations.
Remember that the Save for Tomorrow payouts are tax-free, meaning they���re significantly more generous than those from Social Security, which are potentially taxed. The upshot: Even if the two benefits were equal in dollar terms, the Save for Tomorrow benefit would win out once taxes are factored in.
The contributions are entirely funded by the private sector and are completely voluntary.
While the new accounts would cost taxpayers very little���there would be a small loss in tax revenue due to the tax-advantaged nature of the accounts���the Save for Tomorrow program would save the Social Security program a bundle over the long run.

How so? If someone died at age 64 with $1 million in his Save for Tomorrow account, that money would go to the OASI Trust Fund. In addition, anyone receiving the higher Save for Tomorrow payout isn���t drawing a cent from Social Security. If the Social Security benefit is higher than the Save for Tomorrow benefit, the latter dollars are returned to the OASI Trust Fund. Finally, any money left over upon the death of a beneficiary goes into the OASI Trust Fund.



The biggest criticism of the Save for Tomorrow program would be that it primarily benefits the rich and their progeny. While this may be true, I could envision significant numbers of middle-class grandparents funding these accounts for their grandchildren.

More important, the Save for Tomorrow program is a win-win for everyone. While beneficiaries would certainly benefit from the generosity and foresight of their parents and grandparents, so would everyone else. Every dollar contributed to the program would mean more money for the OASI Trust Fund, which would shore up the Social Security program.

As I see it, the Save for Tomorrow program draws on many strengths, both financial and behavioral:

The program maximizes compounding���s enormous power. Allowing money to compound uninterrupted for up to seven decades can achieve wonderful things. At a 7% real growth rate, $1 turns into $114 in 70 years. In the extreme case, $30,000 contributed at birth could swell to $3.4 million by age 70, providing $137,000 of annual income for life���or millions of dollars for the OASI Trust Fund should the beneficiary not receive the benefits for whatever reason.

While it may seem unfair that a parent or grandparent could ease their progeny���s retirement in such a manner, consider that much of that money might eventually benefit society, should sizable funds remain when the beneficiary dies.

The long time horizon enables taking much greater risk and achieving commensurately greater returns. A 100% stock portfolio is exceedingly risky over short and even intermediate time frames, but over six to seven decades, not so much. A globally diversified 100% stock portfolio may actually be less risky than cash or bonds over such time horizons, once inflation is taken into account.

The program would reduce behavioral risk. The tectonic shift from company-sponsored pensions to individual 401(k) accounts failed to factor in the human element. We are humans, not ���econs,��� as Nobel Prize winner Richard Thaler says. Many of us simply don���t possess the knowledge, self-control or temperament to successfully save and invest for retirement���not to mention the even thornier task of drawing down assets in retirement.

One of the great benefits of the Save for Tomorrow program would be that both tasks would be professionally managed, removing this burden from individuals ill-equipped to perform them. Will members of Congress read HumbleDollar and act on my suggestions? Probably not. I���m a realist. But perhaps farsighted families could find a way to build the notion of extreme compounding into their generational planning.

John Lim is a physician and author of "How to Raise Your Child's Financial IQ," which is available as both a free PDF and a Kindle edition.��Follow John on Twitter @JohnTLim��and check out his earlier articles.

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Buckeye Burglar

���DEAR OHIOAN: According to our records, you have applied for and/or received pandemic unemployment benefits.��� As I haven���t been to Ohio in more than 20 years, I knew something was amiss. It was highly likely I was the victim of identify fraud. After some investigation, I found out someone had been receiving unemployment benefits in my name since March 2021.

I���m hardly the only person victimized by this fraud. In a recent report, Ohio Auditor Keith Faber estimated that $3.8 billion in fraudulent unemployment payments and overpayments had been made since March 2020. The fraud has been so widespread that claims have been made in the names Ohio���s governor and lieutenant governor.

To prevent further fraud, I reported the matter to the state of Ohio. Initially, I was skittish about filing the fraud report online because I had to provide my Social Security number, but I figured the online system was the safest way to report the fraud���and certainly better than giving my personal information over the phone, which had backfired on me before.

Next, I reviewed my credit report to ensure that no one had parlayed my personal information into an even bigger fraud. Fortunately, there was no unusual credit activity. But because someone obviously had my personal information, I decided I���d better monitor my credit activity more closely.

I chatted with a colleague about available services, and ended up selecting the Complete ID service offered by Costco. Costco partners with Experian to provide members with credit monitoring, identity protection and restoration services, which now costs me $8.99 a month. I also pay another $2.99 a month to have my two children���s information monitored.

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Telling Your Story

WANT THE LAST WORD? Write your own obituary.

It���s the final opportunity to tell the world you were a great person and that others should regret never having known you. You can write what you want because, in most newspapers, the obituaries are essentially paid ads���and pricey, to boot. No one is going to challenge your obituary���s veracity, at least not publicly, unless it���s outrageous.

Was she really well liked by everyone she met? Was his spouse the love of his life? Was she a gifted painter? Did she really love her job? Will he reunite with family who are already in heaven? No one can refute or confirm that last statement, but many believe or hope it���s true.

Adjectives are used generously: passionate, wonderful, altruistic, witty. There���s no limit to superlatives. Examples: ���She was unfailingly selfless and kind.��� ���He loved everyone unconditionally and radiated warmth.���

Understandably, there are positive and even ebullient words about the afterlife. An obituary for a woman who loved to garden said her family knew ���she is already planting giant fields of sunflowers outside of her big, colorful mansion surrounded by sunsets and everlasting rainbows.��� Beautiful images, for sure.

Of course, if you���re a public figure, a newspaper will write a ���news��� story about you that might include comments from family, peers and friends, but won���t make fanciful claims. In fact, it might be unflattering. This happened at a small daily newspaper in Pennsylvania where I worked. A story about the death of a local college coach mentioned something negative in the man���s past. His angry son came to the newspaper office and slugged my managing editor.

But most of us can close the chapters of our life by writing what we want to believe is true. For example, you or your family can indicate how you left this earth. You can die, pass away or transition into eternal life. If you die peacefully, it���s assumed death was anticipated. If you die suddenly, it was unexpected.



You don���t need to say the cause of death, but it���s good to see pleas for COVID vaccines from victims��� families. Many young people have died prematurely because of opioid addictions, and the obituaries often mention their heartbreaking struggles.

Almost all obituaries list the facts of a person���s birthplace, parents, survivors and family who died before them. Details of funerals, services, burial sites and memorial contributions fill out the post. Newspapers have online forms to help with this process. But if you���ve been lying about your age all your life, you might not want to include your birth date or age.

Newspapers will also reserve the right to refuse or reject any content before final approval. Don���t claim to have been a nominee for the Nobel Peace Prize, unless you were.

You shouldn���t feel cheap about your last words. But be aware that the average cost for the onetime publication of an obituary in a mid-sized newspaper could run $200 to $300���and the longer it is, the larger the tab.

Finally, there���s the photo choice. As someone once said, a picture is worth a thousand words, so it���s an important decision. Maybe you���ll want to use the studio portrait of when you were in your prime, even though 60 years have since passed. Sometimes, it looks odd to see an obituary for an octogenarian with a photo of her as a debutante. But hey, it���s the final scene in the movie of your life. Let them remember you the way you want.

Want some pointers on how to write your obituary? Here are some links to articles that give detailed advice:

How to Write a Meaningful Obituary
How to Write the Perfect Obituary
How to write an Unforgettable Obituary

Ron Wayne spent 26 years working for newspapers in Pennsylvania and Georgia before becoming the editor in the University of Florida���s main news office. During his 10 years working there, he earned his master���s degree in mass communication and taught as an adjunct in the College of Journalism and Communications. Since retiring last fall, he���s enjoyed a simple life, including reflecting on his experiences on Medium.com . Check out Ron's earlier articles.

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Enough Stuff

IT���S HARD TO IMAGINE writing about gifts when the perfect essay on the topic already exists. I can���t improve on Emerson���s sentiment that expensive but impersonal presents are not gifts but ���apologies for gifts��� or that the true gift is ���a portion of thyself.���

Still, I���m dismayed by the reaction to news that supply chain��woes may negatively affect gift availability this holiday season. Naturally, retailers are worried. Some media outlets are reporting the lack of toys and other gifts in apocalyptic fashion, as though the absence of gifts could spoil, ruin or even completely derail the holiday celebrations.

Consumerism is nothing new when it comes to holidays. But it seems that many now feel that gifts are the most important element of the holidays and perhaps the sole reason we come together. It���s as if many folks imagine the holidays were first created for gift exchange, rather than a commemoration from which gift-giving then evolved.

For all of us, there���s one gift that���s always available to give: expressing appreciation for family and friends. For many of us, we already have the good fortune to possess the greatest of material goods: enough. That���s a crucial notion to keep in mind, especially if we celebrate the holidays with children, who will eagerly consume the values being served.

To that end, please allow me���ironically, of course���to suggest one more item for your shopping list: A book that would make a great gift this season. Enough Stuff is about a village that every year goes on a crazed shopping spree���until a visitor tells them that they can���t seem to get enough. Unfamiliar with the word or idea, the villagers go on a mad frenzy to find and get enough, whatever it is. The story is an early reader book for ages six to 10. It���s filled with wordplay that, I like to think, makes it a fun family read.

Yes, I���m the author. But let me assure you: I���m making nothing on this. All proceeds from 2021���s sales will go to an organization here in Dallas focused on refugee assistance and relief���in other words, helping those who don���t have enough.

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Ask and Receive

OCTOBER���S EMPLOYMENT report was impressive: 531,000 jobs were created, beating economists��� expectations. The unemployment rate ticked down to 4.6%, while average hourly earnings increased a solid 0.4% from September.

Across the board, the data from the U.S. labor market show the economy is humming along, with no signs of stagflation. I like to dig into the wage numbers to see which segments of the workforce are enjoying the best pay increases. Leisure and hospitality pay rose the most, jumping 11.2% from a year ago. In aggregate, total private sector annual wage growth was 4.9%.

That sounds great���until inflation is considered. We���ll get a look at October���s Consumer Price Index (CPI) report Wednesday morning. The consensus estimate calls for 5.8% headline inflation, while core CPI���which excludes the volatile food and energy categories���is expected to climb 4.3%. On an inflation-adjusted basis, wages are up compared to core CPI, but down relative to headline CPI.

Annual employee reviews often take place in the final few weeks of December. Yearly pay raises are usually communicated before the holidays, too. If your salary doesn���t keep pace with inflation, you���re effectively getting a pay cut.

While it can be an uncomfortable conversation, employees must stick up for themselves, particularly in 2021, with inflation running at the highest pace in decades. Requesting an adequate raise to cover the increased cost of living shouldn���t be a controversial request.

Employers must be careful, too. The latest Job Openings and Labor Turnover Survey (JOLTS) report from the Labor Department revealed a record number of workers��quitting. Today���s job market features the biggest pay jump for those workers who switch jobs rather than for those who stay put. This year, maybe more than ever, it can pay to simply ask for an extra pay bump���and for employers to give it.

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Pushing and Pulling

INFLATION IS IN the news and at the gas pump. We see it in smaller product sizes and empty store shelves. According to Google Trends, a record number of people have searched the term ���inflation��� this year. Inflation has even made its way into Halloween spoofs.

While some have suggested that investors are overreacting, I���m not so sure. If higher inflation is here to stay, the implications for both Wall Street and Main Street are profound.

Take the Misery Index, which was invented by economist Arthur Okun in the 1970s. An index of economic distress, it's the sum of the unemployment rate and the inflation rate. The Misery Index peaked at almost 22 in 1980.��Today, it stands at 10. That���s the sum of October���s 4.6% unemployment rate and September���s 5.4% Consumer Price Index.

In three of the last five��recessions, the unemployment rate rose to 10% or higher. If the inflation rate were to double over the next few years and the economy tipped into recession, a Misery Index of 20 could once again be in the cards.

Resurgent inflation also wouldn���t be good news for investors. It���s the great enemy of bonds. Holding cash all but guarantees a loss of purchasing power. Even stocks would likely suffer from an inflation scare, at least in the short run.

But what exactly is causing higher prices? According to economic theory, inflation arises in two ways: demand-pull and cost-push.

Demand-pull inflation occurs when higher demand causes prices to rise. This demand can be driven by increased government spending or cuts in taxes. We���ve certainly had plenty of government spending of late.

On top of that, when the economy shuttered during the pandemic, consumers became forced savers. As the economy reopened, consumers���flush with cash and anxious to spend���have competed for goods and services.

At the same time that demand surged, supply chain disruptions led to widespread shortages of goods. Higher demand and lower supply are a recipe for higher prices.

The other factor driving up prices is cost-push inflation. Rising commodity costs, such as those seen in oil and lumber, are passed on to consumers in the form of higher prices. While not yet widespread, rising wages may also lead to further cost-push inflation.

All this is happening against a backdrop of loose monetary policy. Monetarists, led by the late Milton Friedman, have long argued that inflation is largely a monetary phenomenon: Increase the money supply and you get increased inflation.��Monetarists have been out of vogue recently. But given the pandemic-induced ballooning of the money supply, they may yet get the last laugh.

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