…First, the greedflation story ignores business competition. How could so many firms suddenly command higher profit margins? Corporate concentration didn’t dramatically increase during the pandemic. Firms didn’t magically gain more market power or suddenly become greedier. To believe in greedflation, we’d therefore have to think that businesses across many sectors colluded by using their pricing power to raise prices by limiting their output. But in most industries the urge to undercut rivals and grab market share would undermine this coordination. Moreover, real output actually grew strongly in 2021 and 2022, while inflation surged, thus contradicting the idea that collusive efforts to withhold output was what drove rising prices.
Second, the greedflation tale overlooks consumers. How could customers suddenly afford higher prices across many industries? If businesses in some sectors with price-insensitive customers jacked up prices to puff their profits, those consumers would have less money to spend elsewhere, reducing demand and prices for other goods. This would leave overall inflation largely unchanged. To get a situation in which all prices are rising—a macroeconomic inflation—therefore requires more overall spending, perhaps indicating that there was more money available to spend to begin with.
This points us to the real story: Far from profits driving inflation, inflation and temporarily higher profits were both being driven by a third factor: excessive macroeconomic stimulus.
(CATO | See also CITY JOURNAL)
Supply chains were broken by GOVERNMENT REGULATION AND RULES during covid. It just “didn’t happen” by accident or natural causes. Supply chains were cut by enforcement. As above… long haul video!
- NEWSBUSTERS: “Brooks Surprised ‘Responsible’ Harris Would Endorse Soviet-Like Price Controls”
JOHN STOSSEL on Greed and Inflation
Inflation is sharply up. Now it’s 7%. What went wrong?
STEVE FORBES for PRAGER U ~ Inflation
Look for the source of a society’s collapse, and you’ll usually find the i-word (inflation) at its core. So what exactly is inflation? How does it work? Why is it so dangerous? And how does it affect your everyday life? Steve Forbes breaks it down.
“GREEDFLATION”
The entire article from REASON is this:
The Misuse of Data Behind the ‘Greedflation’ Narrative
There’s no evidence that greed is causing inflation.
The chairman of the WAYS & MEANS Committee has a wonderful [7-2022] fact check page refuting the Democrats “Greedflation” position. I have been warning of this inflationary cliff for many years in my posts on Quantitative Easing.
Likewise, this is a decent article on the topic of disproving a large portion of the “Greedflation” charge:
As the US economy continues to grapple with persistently high inflation, President Biden has repeatedly blamed “corporate greed” as the primary culprit.
The administration has accused companies of engaging in “greedflation” and “shrinkflation” – raising prices and reducing product sizes to maximize profits at the expense of consumers.
However, a recent report from the Federal Reserve Bank of San Francisco challenges this narrative, providing a more nuanced and evidence-based understanding of the factors driving the current inflationary pressures.
The Federal Reserve Bank of San Francisco’s research shows that while there has been an increase in markups (the difference between a product’s selling price and its production cost) in select industries like motor vehicles, the overall markup rate has remained largely in line with previous economic recoveries. Contrary to Biden’s claims, the data suggests that fluctuations in corporate markups have not been a driving force behind the ups and downs of inflation during the post-pandemic recovery.
The report attributes the current inflationary pressures to other factors, such as the massive government stimulus spending and the Federal Reserve’s low-interest-rate policies during the COVID-19 pandemic. These measures boosted consumer demand at a time when the economy was experiencing supply chain disruptions and shortages, leading to a sharp rise in prices across various sectors.
While corporate profits did spike during the economic recovery, the Fed’s analysis indicates that this is not unusual compared to previous recoveries, such as the Great Recession. The increase in profits is largely attributable to pandemic-era subsidies and lower business taxes, rather than a deliberate effort to exploit consumers through “greedflation.” ….
The CAROLINA JOURNAL has a wonderful article as well.
Price inflation is never caused by greed. It’s always caused by a growing money supply. The money supply has grown big-time since 2020, and now we pay a lot more for food and housing. [RPT: actually, the money supply has been growing since Obama]
A new report claims “resounding evidence” shows that high corporate profits are a main driver of ongoing inflation, and companies continue to keep prices high even as their inflationary costs drop.
The report, compiled by the progressive Groundwork Collaborative think tank, found corporate profits accounted for about 53% of inflation during last year’s second and third quarters. Profits drove just 11% of price growth in the 40 years prior to the pandemic, according to the report.
Is this true? Unraveling this mysterious relationship between corporate profit and inflation is easy once we clearly define what profit and inflation are. This allegation that corporate profits accounted for 53 percent of inflation is a result of using wrong definitions and reasoning by mainstream economics researchers.
First, let us see what inflation is. As Henry Hazlitt explained in his article “Inflation in One Page,” inflation is “an increase in the quantity of money and credit. Its chief consequence is soaring prices. Therefore inflation—if we misuse the term to mean the rising prices themselves—is caused solely by printing more money. For this the government’s monetary policies are entirely responsible.”
Faulty reasoning by mainstream economists occurs because of their faulty way of mistaking the price rise effect of inflation as inflation itself. They are putting the cart before the horse. Rising prices is only one of the chief effects of inflation, not inflation itself.
Another mistake that mainstream economists make is that they use the long disproved Marxist “production cost/labor theory of value” to explain the rise in the prices of consumer goods, as is the case with this research done by the Groundwork Collaborative think tank. Production cost (corporate profit) doesn’t determine the prices of consumer goods. The subjective value of the consumer determines those prices. In this article I do not have the space to discuss this very important subjective value theory. I advise my readers to study the literature of the Austrian School of economics.
They also mistake individual commodity price fluctuation for inflation. In a market economy, prices of various commodities are always changing. Such price fluctuation doesn’t reflect the mythical general price level that mainstream economists use to measure inflation.
Also, if corporate profits explain the rise in prices of consumer goods—what mainstream economists call inflation—then what explains the rise in the prices of producer goods? The same corporate profits? We need to remember here that inflation not only increases the prices of consumer goods but also producer goods. When the supply of money rises due to the Fed’s easy money policies of creating dollars out of thin air, it dilutes the purchasing power (value) of all existing dollars in the economy. And because dollars are legal tender money (a common medium of exchange), they will buy less of both consumer and producer goods (i.e., looking from the goods side it will look as if their prices have gone up). Actually, the dollar is losing its value and so buying less of everything against which it is being used in market exchange. …..
Few people have had as profound an impact on modern economics as economist Milton Friedman. His Nobel Prize-winning ideas on free enterprise resonated throughout the world and continue to do so. Johan Norberg, Senior Fellow at the Cato Institute, tells Friedman’s fascinating story.
With the recent passing of Walter Williams, I watched a video of him [Thomas Sowell’s tribute] that reminded me of a video of Milton Friedman on the Donahue Show. So I wanted to combine them for affect.