How Does The U.S. Stack Up?

Key Takeaways

• The US inflation rate is currently at 7.7%, which remains high by historical standards.
• However, on a global scale it looks practically miniscule, with some countries currently experiencing over 200% inflation.
• On the other end of the spectrum, many Asian countries have managed to keep inflation down around 2%.

We may not be hearing quite as much about inflation at the moment, but that doesn’t mean it’s gone anywhere. It may have started to come down in the United States, but it still remains at near record high levels.

The rate of 7.7% in October is still the highest figure we’ve seen prior to 2022 since 1982.

With the Fed determined to bring the rate down, we’ve seen four consecutive rate hikes of 0.75 percentage points. This is the fastest rate of increase experienced in 35 years, with more increases almost certainly on the cards over the next 12 months.

So while inflation looks like it might be starting to turn a corner in the US, in many other countries around the world it continues its relentless march upwards.

Many economies have been hit with rising prices in the wake of the pandemic, but there are also a small number of notable outliers that have managed to keep their inflation rate down.

So where does the US sit in the grand scheme of things?

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Countries with the highest inflation rates

While we’ve not been too happy with inflation running from high single digits to low double digits, we’re actually doing pretty well compared to the worst hit countries. Now obviously the majority of the places experiencing the worst inflation rates in the world are going through some serious economic turmoil.

Inflation rates this high don’t happen in fully functioning economies, and many countries end up reverting to use of the US dollar if their own currency is losing value too quickly. It can also eventually lead to them ditching their currency altogether, and either creating a new one or sticking with the dollar for good.

Either way, it’s not good news for the people who live there.

Zimbabwe +269%

The African nation has dealt with massive rates of inflation for decades. From figures between 20% – 50% throughout the 1990s, to over 500% in the early 200s and then becoming so high as to be practically unmeasurable post-2008.

They experienced extreme hyperinflation during this time, with the estimated peak of November 2008 a rate of 79,600,000,000% per month.

With that history in mind, the current inflation rate actually doesn’t look too bad. It’s also coming down, and the Zimbabwe Treasury predicts that inflation could fall to double digits in 2023.

Lebanon +158%

There’s a financial crisis going on in Lebanon and the currency appears to be collapsing as a result. The financial sector in the country has been experiencing massive losses, but the World Bank has stated that these are too large to be bailed out.

The current hole in the finances stands at $72 billion, which is three times higher than Lebanon’s entire GDP.

It’s estimated that three quarters of the country’s population has been pushed into poverty as a result of the criticism, and it doesn’t look like it will end any time soon. Lebanon’s GDP has dropped 58% between 2019 and 2021, wiping out 15 years worth of economic growth.

The World Bank is working on a way out of the situation, but it’s not likely to be straightforward or quick.

Venezuela +156%

Like Zimbabwe, Venezuela has experienced hyperinflation in recent years. In April of 2019, the International Monetary Fund estimated that the headline rate in the country would hit 10,000,000% by the end of the year, though official figures have been hard to come by.

The country has been experiencing an economic and political crisis since 2016, though high inflation has been a common occurrence in the country since the early 1980s.

There have been some signs of a tentative economic recovery after many years of reducing government spending and budget cuts have helped balance the country’s books.

Other notable examples

In addition to these, there are many other countries experiencing huge inflation rates as well. Syria (+139%), Sudan, (+103%), Argentina (+88%), Turkey (+85.51%) and Sri Lanka (+66%) are some examples with a further 37 countries currently running inflation rates above 15%.

Countries with the lowest inflation rates

On the other end of the spectrum, some countries have managed to keep their inflation rates remarkably low. However as you probably expect, this list is much shorter than those with record high rates of inflation.

A notable trend is that almost all of the countries with the lowest rates of inflation can be found in Asia. Much of this can be attributed to the different consumption habits in this part of the world. A simple example is that Asian cultures eat much more rice than Western countries, with a much lower level of wheat based products in their diet.

The price of wheat was up around 17% in the first half of 2022 compared to 8% for rice. There are other examples of prices coming down in foods such as pork, for reasons unrelated to the Covid19 pandemic.

And of course, the other major factor is that life is not back to normal in many countries in Asia. China is still chasing a zero-covid approach, Hong Kong is similarly restrictive and Malaysia has also been slow to transition to normality. This means demand hasn’t spring back to pre-pandemic levels as it has in other parts of the world.

As a result, many countries in the region are experiencing low levels of inflation. Some examples include Macau (+1.02%), Hong Kong (+1.8%), mainland China (+2.1%), Oman (+2.39%) and Taiwan (+2.72%).

It will remain to be seen whether these countries are able to maintain these low rates, or whether they are simply delaying the inevitable.

How the US stacks up

So overall, the US figures actually aren’t all that bad. Sure, prices are rising more than usual and we’re all needing to tighten our belts, but we can be thankful that we live in a country where a 8 or 9% inflation is a record high.

Among the G20, the US sits around the middle of the pack.

China 2.1%

Saudi Arabia 3.0%

Switzerland 3.0%

Japan 3.7%

South Korea 5.7%

Indonesia 5.7%

France 6.2%

Brazil 6.5%

Singapore 6.7%

India 6.8%

Canada 6.9%

Australia 7.3%

Spain 7.3%

South Africa 7.6%

United States 7.7%

Mexico 8.4%

Germany 10.4%

United Kingdom 11.1%

Italy 11.8%

Russia 12.6%

Netherlands 14.3%

Turkey 85.51%

Argentina 88%

Inflation is a hugely damaging force that can see household wealth evaporate overnight, and it creates significant challenges for people living in countries that can experience hyperinflation.

Regardless of the level of inflation, there is really only one way to properly protect against it. That is to hold your long term capital in growth assets. Cash in the bank is losing value every year, even in stable countries like the US.

What can investors do about inflation?

Many traditional forms of investment like real estate and the stock market will grow above the rate of inflation over the long term. It means that money that’s invested in these assets will increase in value above the rate of rising prices, which protects your wealth during periods of high inflation.

The problem is that these assets come with their own sets of downsides. Property is expensive and illiquid, with a high level of associated taxes and fees involved with buying, selling and simply owning it.

The equity markets on the other hand can be very volatile. As we’ve seen this year, stocks can go down significantly over the short term, and it can be hard for investors to stick to a long term plan while they’re facing big losses on their portfolio.

To help investors feeling unsure what to do in this situation, we created the Inflation Protection Kit. This is an Investment Kit which uses the power of AI to invest in assets which have traditionally been considered a hedge against inflation.

Every week, our AI predicts which assets within the Kit universe are going to perform the best on a risk adjusted basis, and then automatically rebalances the portfolio to create the optimal mix.

The assets the algorithm considers are Treasury Inflation Protected Securities (TIPS), gold and other precious metals, plus a basket of commodities like oil and wheat. These are all assets which tend to hold their value in the face of rising prices.

For investors who don’t want to experience the volatility of the stock market, but still want to keep their funds in pace with inflation, it’s a great option to consider.

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