> Note that Warren Buffet recently noted that his companies are seeing consistent increases in prices throughout the supply chain and will in turn need to raise

> Note that Warren Buffet recently noted that his companies are seeing consistent increases in prices throughout the supply chain and will in turn need to raise prices: This is a known phenomenon: > Imagine an economy in which everyone expects inflation to be high for the foreseeable future (Americans of a certain age don’t have to imagine this; for a while, we lived in that economy). In such an economy, a company setting its prices for the next year will do so taking into account the likelihood that everyone else’s prices — the prices charged by competitors, the costs of raw materials, the wages offered by rival employers — will be going up over time. > Reflecting this expectation, companies will mark prices up relative to what they would have been if they didn’t expect future inflation — and by so doing, will feed the very inflation they fear. In other words, once expectations of sustained inflation are embedded in the economy, inflation becomes self-perpetuating — and bringing it down can be extremely difficult. That’s what makes stagflation — inflation despite high unemployment — possible. > The point, however, is that short-term fluctuations in volatile prices tell us little about whether stagflation is becoming a risk. That’s why Fed policy generally ignores the headline inflation rate and instead focuses on a measure that excludes food and energy prices. > So what’s going to happen in the months ahead? We’ll probably see a number of transitory price increases, not just because the economy is booming, but also because the lingering effects of the pandemic have produced some unusual disruptions — for example, a global shortage of shipping containers. * https://www.nytimes.com/2021/03/22/opinion/us-inflation-stimulus.html https://www.nytimes.com/2021/03/22/opinion/us-inflation-stim... * https://archive.is/Vxj5h https://archive.is/Vxj5h It can become dangerous (see 1970s), but economists have a decent understanding of it nowadays, and so can be factored into decision making.