The WSJ last week reported a surge in US imports, driven in part by retailers building holiday inventory ahead of expected tariff increases.
The expectation of inflation begets … inflation? An economist would yawn.
So too might a historian. In Adam Fergusson’s When Money Dies, he cites V.W. Germains’ account of the hyperinflation that gripped Germany in the early 1920s. As Germains noted, “Women bought in stocks of … goods against a rise in prices … Others squandered money recklessly;
“wine would be dearer tomorrow!”
Dearer wine tomorrow fuels drunkenness today.
But what happens when we wake to find that wine remains dear? What happens when it’s etched into our brain that the price of wine will continue to rise, day by day?
One of the more popular measures of inflation expectations comes from the University of Michigan’s monthly Surveys of Consumers. At last release, the Wolverines pegged 12-month inflation expectations at 4.8% – a figure meaningfully hotter than recent prints of just about any popular price change index.
Since 2020, those expectations have remained stubbornly elevated – Americans see nothing but expensive wine on the horizon. This, despite the fact our bar tab has only increased spectacularly in recent memory.
In other words: Despite the already elevated real-time readings, consumers expect inflation to persist, at an even higher level. And they’re not backing down.
As the yawning economist would remind us, inflation expectations aren’t simply a tool for predicting the future. They can change behavior in the present.
For proof, look no further than retailers building inventory ahead of tariff hikes – a self-fulfilling trend that, if maintained, becomes incredibly difficult to buck.
Exogenous shocks dissipate. Businesses find ways to re-direct supply chains. A war, in theory, ends.
But until the American consumer believes wine will be cheaper tomorrow, it remains happy hour today. And the hangovers may never end.
Tea Leaves #3: THE NEVER-ENDING HANGOVER
Originally published July 1, 2026
