In case you missed it, there's a term floating around economic circles that seeks to put the blame for inflation squarely on the shoulders of businesses.
It's called โgreedflation.โ On the left, it's a term used to describe, well, theftโฆthe blatant effort of corporations big, small, local and foreign to raise prices while everyone else's attention is focused on other things.
Setting aside the genuine supply and demand shocks that rattled the global economy during the COVID lockdowns, coupled with unprecedented levels of government spending and easy monetary policy (all of which stoked demandโฆdoes the greedflation hypothesis have any real-world merit?
The Cato Institute's Scott Lincicome doesn't think so. His reasons vary but one that's intriguing is how the greedflation hypothesis completely ignores one side of the market equation: consumers.
Profitโโmaximizing firms could only raise prices (and earn higher profits) because consumers let them; consumers let them because they were flush with cash; and consumers were flush with cash mainly because of government policy.
The role that consumers play in companies' pricing decisions isn't exactly groundbreaking stuff; it's a standard part of mainstream microeconomics and frequently mentioned in economic analyses and business reportingโeven for essentials like food. For example, a Kansas City Fed report from late last year found that consumer spending and behavior (eating more at home, and then shifting back)โnot corporate profiteeringโwere the primary drivers of higher U.S. food prices during the postโโpandemic recovery.
Those pesky buyers and their tendency to keep buying things. Only those roasted and basted in the fires of anti-capitalism would refuse to admit the essential role of buyers in a market. After all, you can't have a market without them.
Where, then, does the inflation problem originate? Our old friend, the state:
โฆnumerous academic analyses have foundโฆthat โthe inflation problem we're experiencing was indeed fiscally induced, though โperhaps the Fed could have been less accommodative of Congress's fiscal spending, and it surely could have started tightening a bit sooner.โ Other studies show much the same. As the Journal's Greg Ip admitted earlier this month, โin retrospect, fiscal policy overdid it.โ
Coupled with a decade of rock bottom interest rates, quantitative easing and other extraordinary measures to help the economy recovery from the 2008-2009 recession and there should be little wonder inflation would return. For heaven's sake, the economic powers-that-be feared deflation โ or falling prices โ was the greatest threat to the economic system just a few years ago. And to combat it, they pulled out all the stops to gin-up inflation. Up to and including the previously unknown policies of negative interest rates.
โGreedflation,โ then, is still a fringe theory that ignores a major economic players and forces in order to bash capitalism. It also has to ignore the news cycle:
As [Jason] Furman recently noted on Twitter, the greedflation thesis requires us to believe that goods companies had (and abused) market power in 2021โ22 but then passed the baton to totally different services companies in totally different industries sometime last year. That is some seriously impressive, economyโโwide collusion!
Also, as several folks have recently noted, corporate profits are now falling and have been for three straight quarters (two if you exclude financial companies), even as inflation has persisted.
Never let the facts, figures and news get in the way of a good ideological screed, it seems.
The opinions expressed in this article are those of the author and do not necessarily reflect the positions ofย American Liberty News.
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5 Comments
Mark Twain is reported to have said: ” If I were designing the initial population of an insane asylum, I would start with everyone who claims to understand inflation”. joebiden will be in room 1. democRATS will take all the other rooms and wards.
Smart man that Twain. Even back then he knew how screwed up they were, and all the trouble they would cause the country.
Good then hit Hollywood hard & NE US area
Wall St.
For $$$$$$
Biden & Co. all live in La-La land. And don’t give a damn about the rest of us while they line their pockets with our tax money.
They always blame everyone and everything but never accept responsibility for what they do. Politicians are crooks, doesn’t matter which party they belong to.