Peter Morici

Buffeted by slow growth and too few jobs, Americans now have to deal with more inflation.

In May, consumer prices rose at more than a 4 percent annual pace, and inflation has been heating up the last several months.

Rapid growth in China is boosting demand for agricultural products, and prices are up for beef, pork and other food products.

Core inflation—prices less food and energy—after remaining fairly subdued for several years, is also accelerating, and Americans may be facing inflation greater than 3 or even 4 percent the balance of this year and next.

The Federal Reserve will be faced with a Hobson’s choice—tighten credit to combat inflation or continue printing more money in hopes of igniting growth.

Here are five things to know about higher inflation.

1. More Money Won’t Boost Growth

What caused the financial crisis and slow growth has not been fixed.

Banks continue to gamble with the cheap money the Fed provides instead of lending it for job-creating projects.

Subsidized Chinese products are still flooding U.S. markets, destroying good paying manufacturing jobs, and President Obama is reluctant to challenge Chinese protectionism.

Similarly, he has not been willing to open up drilling for oil off the Atlantic, Pacific and much of the Gulf coasts. That keeps America dependent on imported oil, and sends consumer dollars abroad instead of creating jobs here.

The quagmire of regulations grows worse, making it much easier to start businesses and hire workers in Asia than America.

Fixing those would boost U.S. growth to 4 or 5 percent and quickly create 5 million jobs.

2. Easy Money and High Inflation Steals from the Elderly

Easy money pushes down rates on CDs where many retired Americans park savings to subsidize social security and pensions.

More elderly today are working today than at the turn of the century, and higher inflation will push more of them into the part-time job market.

3. Federal Policies Makes Too Much Inflation Certain

Many homeowners have only one source for high speed internet and cable TV, but the government does not regulate cable companies as it does electric utilities. Rates have risen rapidly in recent years.

Peter Morici

Professor Peter Morici is a recognized expert on economic policy and international economics. He has lectured and offered executive programs at more than 100 institutions including Columbia University, the Harvard Business School and Oxford University.