This Inflation Is Different Than COVID Inflation
Peter Reagan

As a kid, I used to watch magicians like David Copperfield and wonder how they pulled it off.

How did something disappear right in front of you? Or reappear somewhere else?

I never became an expert in stage magic, but I did learn one thing:

A good illusion doesn’t change reality – it changes what you pay attention to.

And that same principle shows up in the economy.

This time, the inflation explanation matters

Recently, Howard Schneider at Reuters suggested that the Federal Reserve needs to help people understand why today’s inflation is different from what we experienced in 2022.

I'm going to say it. He’s not wrong.

Back then, inflation had obvious causes:

• Massive government stimulus spending
• And a corresponding explosion in global government debt
• Supply chain disruptions and factory shutdowns 

"Supply chain snarls" meant I didn’t shop for what I wanted, I just bought whatever was left on the shelf.(Meals at the Reagan household became exercises in creativity). Used cars were selling for more than new ones! If you could even find a new one. For weeks, my neighborhood chat group was full of nothing but toilet paper sightings. I tell you, when two dozen middle-class professionals become obsessed with acquiring toilet paper, of all things, something has gone very wrong. For a while there, during Covid, all we had was our stimulus checks and nothing to spend them on.

What happened? All that freshly-printed currency was chasing a dozen rolls of toilet paper and a few cans of peas. Of course, prices jumped – inflation hit a 40-year high. The Fed responded aggressively, boosting interest rates tenfold. Official after official told us the Covid-era inflation was transitory.

The higher prices never came back down, though. (It's much easier to print a bunch of dollars and drop them out of a helicopter than it is to search the neighborhood, confiscate those dollars and burn them.) 

From the day President Trump officially declared pandemic lockdown, March 13 2020 to today, the cost of living has risen about 25% (on average). 

That was bad enough!

But today’s situation is more complicated.

This time, the federal government isn’t injecting stimulus at the same scale. Supply chains, while imperfect (especially in the Strait of Hormuz right now), are more or less functioning. Factories are running...

And yet prices are still rising.

So what’s going on?

The part that’s harder to control

A growing share of today’s price pressure is tied to energy.

As Reuters columnist Jamie McGeever noted, U.S. oil prices have surged more than 70% over the past year.

That matters more than most people realize.

Because energy isn’t just another category of spending – it’s an input into nearly everything:

• Shipping
• Manufacturing
• Food production
• Heating and electricity

When energy rises, it quietly pushes up costs across the entire economy.

You may notice it at the gas pump.

But you feel it everywhere else.

Why this kind of inflation sticks

Here’s the key difference:

In 2022, inflation was largely driven by forces policymakers could influence – spending and interest rates.

Today, energy-driven inflation is tied more to physical supply and global demand. That makes it:

• Harder to contain
• Slower to reverse
• More likely to linger

And importantly, it doesn’t replace earlier inflation pressures – it compounds them.

In other words, we’re not dealing with a new inflation story.

We’re dealing with a more complicated one...

A global problem, not a local one

This isn’t just happening in the U.S.

According to Ajay Banga, global growth is slowing even as inflation pressures persist.

At the same time, the world faces a massive shortfall in job creation – particularly in developing economies.

That combination – slower growth and rising costs – isn’t just uncomfortable.

It’s historically unstable.

Who feels it first

Inflation always hits unevenly. 

And this kind tends to hit hardest where there’s the least flexibility.

For retirees and those on fixed incomes, even small increases compound quickly.

As Maurie Backman noted for The Motley Fool, even modest increases in everyday expenses can significantly affect our quality of life.

That’s not an abstract concern!

It shows up in small decisions:

• Putting off a prescription refill
• Switching to store-brand groceries
• Delaying your scheduled check-up at the doctor, or your cleaning at the dentist

Individually, these seem manageable... Together, though, they add up quickly. (Remember, every $1 spent on preventative dental care, for example, saves you between $8-$50 in future treatment costs, not to mention pain and suffering.)

But prudent families distinguish between what they can control and make the necessary changes – and what they can't control and must endure... 

What we can – and can’t – do about it

We don’t control energy prices.

We don’t control global supply chains.

And we certainly don’t set monetary policy. (The Federal Reserve has been ignoring my advice for decades now...)

But that doesn’t mean everything is out of your hands.

Periods like this tend to reward people who think ahead – who recognize that inflation isn’t just a moment. Not just one unexpectedly high CPI report (or even a series of them). No, inflationary pressures are a pattern that can evolve, shift and change over time.

That’s one reason many Americans choose to diversify a portion of their savings into physical precious metals.

Not because they expect a windfall! Not because gold is America's #2 favorite investment, or because it's a "hot trade." (In fact, here at Birch Gold, we do our best to screen out people who are interested in day-trading and speculation.)

I believe the massive and growing interest in physical gold ownership is simple: Because folks are fed up, and they want to own something that’s independent from the financial pressures driving costs higher across the economy. One of the very few financial assets that's not just an IOU or a promise to pay.

If you’re interested in learning more, I encourage you to get your free copy of the Birch Gold Precious Metals Information Kit, updated for 2026.

 

 

Peter Reagan is a financial market strategist at Birch Gold Group. As the Precious Metal IRA Specialists, Birch Gold helps Americans protect their retirement savings with physical gold and silver.

 

www.birchgold.com