Wars are contributing to inflation – even the war against inflation.

For months the Fed has been waging a robust war against inflation. But as we know, this is not the only war being fought. There are wars against drug addiction, poverty and even illegal immigration. And of course, the classic definition of wars being fought in Ukraine and now Israel against terrorists within the Gaza strip. Though these wars seem to be completely separate from the war on inflation, in reality they are affecting inflation significantly.

How do these wars affect inflation? Well, when Russia invaded Ukraine, the energy markets were thrown into turmoil as Russia is a major energy producer, especially within Europe. Plus, Ukraine is a major producer of agriculture products and the war contributed to skyrocketing prices of products such as wheat and sunflower oil. This does not even mention the defense goods being produced to feed this war. Russia’s military spending alone has tripled. This spending puts pressure on many other resources and even though we are not fighting in Ukraine or Israel—money and resources are being expended which contribute to inflation.

Going back to the war on inflation, even the Fed raising interest rates to halt inflation is causing inflation. How? Well, it has been said that the vast majority of inflation reported in the September Consumer Price Index was due to rising shelter costs. Higher rates cause mortgage and rent payments to rise. While the Fed was counting on home prices falling in response to higher rates, thus far they have risen this year, albeit much slower than previous years. So, there you have it—wars are contributing to inflation --- even the war against inflation. And the war against inflation must be won globally.