Connect with us

Spread & Containment

‘Inflationary Psychology’ Has Set In – Dislodging It Won’t Be Easy

‘Inflationary Psychology’ Has Set In – Dislodging It Won’t Be Easy

Authored by Richard Curtin via University of Michigan,

There is a high…

Published

1 year ago

on

'Inflationary Psychology' Has Set In - Dislodging It Won't Be Easy

Authored by Richard Curtin via University of Michigan,

There is a high probability that a self-perpetuating wage-price spiral will develop in the next few years. Households have already become less resistant to paying higher prices and firms have become less resistant to offering higher wages. Prices and wages will continue to spiral upward until the cumulative erosion in inflation-adjusted incomes causes the economy to collapse in recession. It is like the children's game of musical chairs: Everyone knows the game will end, but they feel compelled to keep racing around the circle at an ever-faster pace hoping their forced exit will leave them in the best possible position—even if it still means an inflation-adjusted loss.

This situation has been termed “inflationary psychology.” Consumers purposely advance their purchases in order to beat anticipated future price increases. Firms readily pass along higher costs to consumers, including the future cost increases that they anticipate. That's what happened in the last inflationary age, which started in 1965 and ended in 1982: Expected inflation became a self-fulfilling prophecy. Many commentaries assert that the current situation is nothing like the situation faced in 1978-80. That's true, but irrelevant. The more apt comparison would be to the five to ten years prior to that period, when inflation had not yet reached crisis levels. Government officials claimed they had the policy tools that could easily reverse inflation, just as they claim now.

Those policies, however, repeatedly failed across administrations, from Lyndon B. Johnson's surtax, to Richard Nixon's wage and price controls, to Gerald Ford's public relations “Whip Inflation Now” campaign, and Jimmy Carter's fireside pleas to diminish material aspirations. Only after Paul Volcker was appointed Federal Reserve chair and raised the fed funds rate to 20% in 1980 did inflation begin to fall. He pushed up rates aggressively, by 10 percentage points in just six months. The resulting 10% unemployment rate was needed to reduce inflation by 10 percentage points.

Today's mantra is, “This time is different.” Supply disruptions were said to be transient, and the inflation rate would soon fade. The University of Michigan's survey confirmed that shortages were important, and those shortages played an initial role in raising inflation expectations. Awareness of shortages has remained high, mentioned by half of all consumers in the past nine months. Nonetheless, shortages are no longer associated with higher inflation expectations—their inflation expectations now differ by less than one-tenth of a percentage point.

Consumers quickly adopted the notion that inflation had multiple causes, focusing on the growth in federal spending and expansionary monetary policy as the dual driving forces. Pandemic transfers and relief payments produced extraordinary increases in household incomes. The income gains meant that household budgets could easily withstand higher prices. These transfers meant survival for many households, with some quickly exhausting their funds. Most workers still remained employed and boosted their spending. A good deal of those funds were added to their savings and reserves, which will constitute a more-lasting offset to higher prices.

Several other associated findings from the University of Michigan's consumer sentiment survey are also relevant. Although consumers have increasingly expected higher inflation, they have also expected a strong job market and rising wages, especially among consumers under age 45. In the year ahead, wage gains will continue to reduce resistance to rising prices among consumers, and the ability of firms to easily raise their selling prices will continue to reduce their resistance to increasing wages. Thus, the essential ingredients of a self-perpetuating wage-price spiral are now in place: rising inflation accompanied by rising wages.

The Federal Reserve has the difficult task of balancing reductions in inflation against job losses. When consumers were recently asked which was the more critical problem facing the nation, nearly nine-in-ten cited inflation. The erosion in living standards due to rising inflation was the most common complaint when consumers were asked to describe in their own words how their finances had recently changed. While the initial rise was among the lowest-income households, those complaints have rapidly spread to middle- and upper-income households. Surging gas, food, and housing prices have forced nearly all families to go through the painful process of deciding which normally purchased items they could no longer afford.

Importantly, the majority of today's consumers did not experience the accelerating inflation of the 1970s. Most have personally experienced only very low inflation, with a few short-lived spikes in oil prices. This lack of experience has magnified their reactions to the higher inflation rate that now prevails. Another critical characteristic of the earlier inflation era was frequent temporary reversals in inflation, only to be followed by new peaks. That same pattern should be expected in the months ahead.

Most consumers expect the government to undertake policy actions to curb inflation. Indeed, the largest proportion of consumers in the past half-century have expected the Fed to hike interest rates. Given that the fed funds rate had lingered for an extended period near zero, that was not a hard call to make. What was perhaps more surprising was that the quarter-point hike the Fed adopted in March was simply too small to signal an aggressive defense against rising inflation. Instead, it signaled the continuation of a strong labor market along with an inflation rate that would continue to rise.

Much more aggressive policy moves against inflation may arouse some controversy. Nonetheless, they are needed. Adam Smith's legendary invisible hand describes how individuals acting in their own self-interest can create unintended benefits for the entire society. Unfortunately, the country now faces the potential for an inflationary hand that can transform self-interested decisions into losses for the entire economy.

*  *  *

Richard Curtin is a research professor at the University of Michigan and has directed the consumer sentiment surveys since 1976.

Tyler Durden Sun, 04/17/2022 - 16:30

Read More

Related Topics:
Continue Reading

Government

Hyro secures $20M for its AI-powered, healthcare-focused conversational platform

Israel Krush and Rom Cohen first met in an AI course at Cornell Tech, where they bonded over a shared desire to apply AI voice technologies to the healthcare…

Published

2 hours ago

on

May 31, 2023

By

Israel Krush and Rom Cohen first met in an AI course at Cornell Tech, where they bonded over a shared desire to apply AI voice technologies to the healthcare sector. Specifically, they sought to automate the routine messages and calls that often lead to administrative burnout, like calls about scheduling, prescription refills and searching through physician directories.

Several years after graduating, Krush and Cohen productized their ideas with Hyro, which uses AI to facilitate text and voice conversations across the web, call centers and apps between healthcare organizations and their clients. Hyro today announced that it raised $20 million in a Series B round led by Liberty Mutual, Macquarie Capital and Black Opal, bringing the startup’s total raised to $35 million.

Krush says that the new cash will be put toward expanding Hyro’s go-to-market teams and R&D.

“When we searched for a domain that would benefit from transforming these technologies most, we discovered and validated that healthcare, with staffing shortages and antiquated processes, had the greatest need and pain points, and have continued to focus on this particular vertical,” Krush told TechCrunch in an email interview.

To Krush’s point, the healthcare industry faces a major staffing shortfall, exacerbated by the logistical complications that arose during the pandemic. In a recent interview with Keona Health, Halee Fischer-Wright, CEO of Medical Group Management Association (MGMA), said that MGMA’s heard that 88% of medical practices have had difficulties recruiting front-of-office staff over the last year. By another estimates, the healthcare field has lost 20% of its workforce.

Hyro doesn’t attempt to replace staffers. But it does inject automation into the equation. The platform is essentially a drop-in replacement for traditional IVR systems, handling calls and texts automatically using conversational AI.

Hyro can answer common questions and handle tasks like booking or rescheduling an appointment, providing engagement and conversion metrics on the backend as it does so.

Plenty of platforms do — or at least claim to. See RedRoute, a voice-based conversational AI startup that delivers an “Alexa-like” customer service experience over the phone. Elsewhere, there’s Omilia, which provides a conversational solution that works on all platforms (e.g. phone, web chat, social networks, SMS and more) and integrates with existing customer support systems.

But Krush claims that Hyro is differentiated. For one, he says, it offers an AI-powered search feature that scrapes up-to-date information from a customer’s website — ostensibly preventing wrong answers to questions (a notorious problem with text-generating AI). Hyro also boasts “smart routing,” which enables it to “intelligently” decide whether to complete a task automatically, send a link to self-serve via SMS or route a request to the right department.

A bot created using Hyro’s development tools. Image Credits: Hyro

“Our AI assistants have been used by tens of millions of patients, automating conversations on various channels,” Krush said. “Hyro creates a feedback loop by identifying missing knowledge gaps, basically mimicking the operations of a call center agent. It also shows within a conversation exactly how the AI assistant deduced the correct response to a patient or customer query, meaning that if incorrect answers were given, an enterprise can understand exactly which piece of content or dataset is labeled incorrectly and fix accordingly.”

Of course, no technology’s perfect, and Hyro’s likely isn’t an exception to the rule. But the startup’s sales pitch was enough to win over dozens of healthcare networks, providers and hospitals as clients, including Weill Cornell Medicine. Annual recurring revenue has doubled since Hyro went to market in 2019, Krush claims.

Hyro’s future plans entail expanding to industries adjacent to healthcare, including real estate and the public sector, as well as rounding out the platform with more customization options, business optimization recommendations and “variety” in the AI skills that Hyro supports.

“The pandemic expedited digital transformation for healthcare and made the problems we’re solving very clear and obvious (e.g. the spike in calls surrounding information, access to testing, etc.),” Krush said. “We were one of the first to offer a COVID-19 virtual assistant that deployed in under 48 hours based on trusted information from the health system and trusted resources such as the CDC and World Health Organization …. Hyro is well funded, with good growth and momentum, and we’ve always managed a responsible budget, so we’re actually looking to expand and gather more market share while competitors are slowing down.”

Hyro secures $20M for its AI-powered, healthcare-focused conversational platform by Kyle Wiggers originally published on TechCrunch

Read More

Continue Reading

Spread & Containment

Burger King Adds a Failed McDonald’s Comfort-Food Menu Item

Both companies have tried to make this beloved southern staple work, and Burger King is trying again with multiple new versions.

Published

2 hours ago

on

May 31, 2023

By

Fast-food burger chains deal in the familiar. 

They sell comfort food, meals that make their customers feel good (even if that feeling soon enough turns to regret).

When one of the big three chains -- McDonald's, Wendy's (WEN) - Get Free Report, and Burger King -- adds a new menu item, it's either something outrageous designed to get publicity or an item that builds on the comfort-food model.

DON'T MISS: Unique McDonald's Sandwich Makes Its Menu Return

That's why so many fast-food innovations arise from taking a core menu item and give it a small twist. Wendy's does this more than any other chain as it rotates in different takes on cheese fries and new burgers that add well-known flavors like pretzel buns or more bacon.

McDonald's (MCD) - Get Free Report has been experimenting with similar ideas -- specifically trying to make southern classics like sweet tea and chicken biscuits -- work. The chain has had more success with sweet tea, which has become a menu staple, than it has with making chicken biscuits a morning staple.

And while McDonald's has tried to add southern style chicken biscuits to its morning menu without sustained success, that has not stopped its rivals from taking their own shot at the regional favorite. 

Wendy's has offered its Honey Butter Chicken Biscuit since it brought back its breakfast menu in 2020. And now Restaurant Brands International's (QSR) - Get Free Report Burger King has decided to add multiple takes on a chicken biscuit to its morning menu.

Wendy's also sold a "hot" version of its Honey Butter Chicken Biscuit.

Image source: Wendy's.

Burger King Adds Multiple Chicken Biscuits  

Burger King has built its morning menu around meat. The chain sells versions of its famed Croissan'Wich with double sausage, one with bacon, ham, and sausage, and similar offerings on biscuits.

Now, Burger King has been testing adding chicken to its meaty morning lineup.

Some of the chain's locations already sell a regular Chicken Biscuit and a Smoky Maple Chicken Croissan’wich (although those items are not being sold nationwide) and now it's testing a new take on a chicken biscuit in select markets.

"The Smoky Maple Chicken Biscuit features breaded white meat chicken with a smoky maple glaze on a warm buttermilk biscuit. It will be available through Aug. 31 while supplies last," according to Restaurant Business Online.

Burger King is offering the Smoky Maple Chicken Biscuit only in the Kansas City and Orlando-Daytona Beach markets.

McDonald's Also Bets On Breakfast Comfort Food 

McDonald's first put bagels on its breakfast menu in 1999. They were removed in January 2022 when the chain eliminated all-day breakfast and slimmed down its morning menu due to the covid pandemic.

Losing the bagels wasn't just about customers getting one less bread choice for their breakfast sandwich. It also invvolved McDonald's removing steak -- a meat that was only sold on a bagel -- from its morning menu.

Now, after a slow rollout across the country, McDonald's has returned its popular breakfast bagels to menus nationwide (albeit without making an official announcement).

Fans clamored for the return on social media in April 2022, when McDonald's Tweeted "Bring back ____." Tens of thousands of fans answered the query and the Breakfast Bagels were a popular request.

The most-requested item, the Snack Wrap, has not been returned and might not despite customer interest because making them adds complexity to the chain's kitchen operations. 

That's something the company has been working against as it works to streamline delivery and digital sales.         

Read More

Continue Reading

Government

Hyro secures $30M for its AI-powered, healthcare-focused conversational platform

Israel Krush and Rom Cohen first met in an AI course at Cornell Tech, where they bonded over a shared desire to apply AI voice technologies to the healthcare…

Published

4 hours ago

on

May 31, 2023

By

Israel Krush and Rom Cohen first met in an AI course at Cornell Tech, where they bonded over a shared desire to apply AI voice technologies to the healthcare sector. Specifically, they sought to automate the routine messages and calls that often lead to administrative burnout, like calls about scheduling, prescription refills and searching through physician directories.

Several years after graduating, Krush and Cohen productized their ideas with Hyro, which uses AI to facilitate text and voice conversations across the web, call centers and apps between healthcare organizations and their clients. Hyro today announced that it raised $20 million in a Series B round led by Liberty Mutual, Macquarie Capital and Black Opal, bringing the startup’s total raised to $35 million.

Krush says that the new cash will be put toward expanding Hyro’s go-to-market teams and R&D.

“When we searched for a domain that would benefit from transforming these technologies most, we discovered and validated that healthcare, with staffing shortages and antiquated processes, had the greatest need and pain points, and have continued to focus on this particular vertical,” Krush told TechCrunch in an email interview.

To Krush’s point, the healthcare industry faces a major staffing shortfall, exacerbated by the logistical complications that arose during the pandemic. In a recent interview with Keona Health, Halee Fischer-Wright, CEO of Medical Group Management Association (MGMA), said that MGMA’s heard that 88% of medical practices have had difficulties recruiting front-of-office staff over the last year. By another estimates, the healthcare field has lost 20% of its workforce.

Hyro doesn’t attempt to replace staffers. But it does inject automation into the equation. The platform is essentially a drop-in replacement for traditional IVR systems, handling calls and texts automatically using conversational AI.

Hyro can answer common questions and handle tasks like booking or rescheduling an appointment, providing engagement and conversion metrics on the backend as it does so.

Plenty of platforms do — or at least claim to. See RedRoute, a voice-based conversational AI startup that delivers an “Alexa-like” customer service experience over the phone. Elsewhere, there’s Omilia, which provides a conversational solution that works on all platforms (e.g. phone, web chat, social networks, SMS and more) and integrates with existing customer support systems.

But Krush claims that Hyro is differentiated. For one, he says, it offers an AI-powered search feature that scrapes up-to-date information from a customer’s website — ostensibly preventing wrong answers to questions (a notorious problem with text-generating AI). Hyro also boasts “smart routing,” which enables it to “intelligently” decide whether to complete a task automatically, send a link to self-serve via SMS or route a request to the right department.

A bot created using Hyro’s development tools. Image Credits: Hyro

“Our AI assistants have been used by tens of millions of patients, automating conversations on various channels,” Krush said. “Hyro creates a feedback loop by identifying missing knowledge gaps, basically mimicking the operations of a call center agent. It also shows within a conversation exactly how the AI assistant deduced the correct response to a patient or customer query, meaning that if incorrect answers were given, an enterprise can understand exactly which piece of content or dataset is labeled incorrectly and fix accordingly.”

Of course, no technology’s perfect, and Hyro’s likely isn’t an exception to the rule. But the startup’s sales pitch was enough to win over dozens of healthcare networks, providers and hospitals as clients, including Weill Cornell Medicine. Annual recurring revenue has doubled since Hyro went to market in 2019, Krush claims.

Hyro’s future plans entail expanding to industries adjacent to healthcare, including real estate and the public sector, as well as rounding out the platform with more customization options, business optimization recommendations and “variety” in the AI skills that Hyro supports.

“The pandemic expedited digital transformation for healthcare and made the problems we’re solving very clear and obvious (e.g. the spike in calls surrounding information, access to testing, etc.),” Krush said. “We were one of the first to offer a COVID-19 virtual assistant that deployed in under 48 hours based on trusted information from the health system and trusted resources such as the CDC and World Health Organization …. Hyro is well funded, with good growth and momentum, and we’ve always managed a responsible budget, so we’re actually looking to expand and gather more market share while competitors are slowing down.”

Hyro secures $30M for its AI-powered, healthcare-focused conversational platform by Kyle Wiggers originally published on TechCrunch

Read More

Continue Reading

Trending