Bay Area Inflation Fears Rise Along With Price of Goods

SAN FRANCISCO (CBS SF) -- Consumer Price Index data released Wednesday shows that prices jumped by an annual rate of 6.2 percent last month, the fastest rise in more than 30 years. It's raising fears of inflation among economists and consumers alike.

Inflation occurs when too many dollars are chasing too few products, and the price of everything begins to rise. That's what's happening now. The most obvious price hikes have been at the gas pump. Katie Cox was aghast when she gassed up her car at a station in Alamo.

"I literally was like, oh my gosh, it's almost five dollar a gallon. It's crazy," she said. "It makes you think twice about how much you're driving."

The same was true at the grocery store. Walt Segal said he has noticed prices slowly rising, but the recent jumps have been alarming.

"We were definitely going to pay 39 or 49 cents for tomatoes," he said. "Now we're looking at 3.99 for a bag of four or five tomatoes, which is just ridiculous for us."

Much of it is happening because of the government's response to the pandemic. At JP King Advisors, an investment firm in Walnut Creek, President and CEO Scott Horton said when the feds handed out thousands of dollars to unemployed people in multi-trillion dollar aid packages, it had a predictable effect.

"When you essentially print money out of thin air and distribute it to people, they're going to spend it, they're going to invest it. And that pushes prices up," Horton said.

He said it's important to invest money in ways that can keep it above the rate of inflation. Those who have cash sitting in a bank account, earning little to no interest, will likely see their money lose about 4 percent of its value each year.

"100,000 dollars today will be worth 80,000-85,000 in five years," he said. "That's a pretty big loss!"

But what about those who have no money to invest? Many workers got a pay raise because of the worker shortage, but they may need it all just to pay for the rise in prices.

"Those people that are paycheck to paycheck, that don't own investments, they are getting left behind," said Horton. "And people that have money in stocks and real estate, they're going to be able to stay ahead. So, it's terrible for wealth inequality."

A flood of dollars, coupled with a slowdown in production and delivery of products, has set up a competition for goods and services. And the cruelty of inflation is, those with the least amount of money end up paying the highest price for it.