Occam’s razor says the more simple/plausible explanation, that a huge increase in the monetary supply causing higher prices through supply and demand, is about a thousand times more plausible than tens of thousands of corporations simultaneously deciding to coordinate to fix prices despite that it’s in each of their best interests individually to break with that scheme. With no actual evidence of a concerted attempt across the entire economy to fix prices (not to be confused with a couple corporations having board meetings where someone bragged about raising prices).
Or, in simple terms - it’s not that every single other good in the entire economy has suddenly become worth more as the result of some overarching conspiracy. It’s that they printed a bunch of money and it’s now worth less.
I would recommend anyone who still believes the “greedflation” thing spends an hour reading some articles critical of the theory. Not really looking for a debate about it tbh.
“Not really looking for a debate about it tbh.”
No, just the last word. There’s a lot more to it that clearly explains why it’s a systematic failure that led to this, and it’s a lot more complex that just over supply of cash. You can’t stop looking at other facts once you’ve researched just enough to find an answer you’re comfortable with.
Your previous comment was basically a massive industry wide conspiracy theory though, so their response of a more sensible answer to give you something a bit more concrete to go on was pretty reasonable to me.
Not a conspiracy theory but the inevitable conclusion of a system left unchecked by regulation for too long. We have slowly rolled ourselves to the edge for decades yet have been able to maintain a very precarious balance, until a worldwide pandemic kicked the cart and set it rolling down the hill.
Did the entire planet have too much cash and an urge to spend it all at once? Yes. That only explains the flashpoint where prices exploded. Demand was at an unprecedented high from the world coming out of lock down at the same time that supply was at an all time low thanks to the pandemic. (There’s a lot more to all of this of course, but there are going to be countless PhD thesis written about this macroeconomic clusterfuck and this isn’t one of them.) So far, this all makes sense. Where things go sideways is when supply stabilizes, cost of goods sold start to go down, and yet prices continue to rise. Remember how the fed thought that information was going to be a short, temporary spike that didn’t require intervention? This is why. They expected the system to autocorrect, but it didn’t. Prices continue to rise. People have less money. Prices continue to rise. Interest rates skyrocket in an attempt to cool the economy. Prices continue to rise. Consumer spending slows but prices rise.
Corporations are literally geared towards maximizing profits. It’s not a conspiracy if they are working as intended. The failure, IMHO, is in how we have chosen to manage our economy. Complete deregulation and a slew of other choices have brought us here. Not a conspiracy but also not as simple as “too much money” or “too much cheap credit”. So, amending my original comment, yes it is in part inflation but it isn’t just inflation.
PS: Credit card debt in the US surpassed $1T. We’re running on literal borrowed time and every business around us is trying to find new and creative ways to squeeze every penny we don’t have out of us, by design, without a check or a balance in sight.
I’m sorry you’re under the impression that the economy is controlled equally by tens of thousands of corporations. Its much more like 2 dozen control nearly all money that presently exists. They wake up everyday and fix prices. They’ve been doing it a lot ever since 2008 and the utter downfall of consumer protections. I also have no fucking clue what you mean when you say that not fixing prices is in their best interests?? Like, you realize that by price fixing they make billions of dollars more than they should be? How tf is making even more money not in the interest of a corporation? They literally profit off of wars. Any possible thing that increases the amount of capital they generate is in their own best interests. Even employing children, or slaves. Capitalism is designed specifically to be exploitative of as many people as possible to generate as much capital as possible.
I’m sorry you’re under the impression that the economy is controlled equally by tens of thousands of corporations. Its much more like 2 dozen control nearly all money that presently exists.
There are 8 million businesses in the U.S. We have problems with monopolization, but to the level where a cross-economy price fixing scheme could possibly be implemented, we are not at that point. That’s an extraordinary claim requiring extraordinary proof, not something to just believe dogmatically because you don’t like capitalism.
I also have no fucking clue what you mean when you say that not fixing prices is in their best interests??
You could start by just asking me. This is basic game theory. Market price of a good is 10 dollars, ACME and BLLC corp meet and fix prices at 15 dollars. ACME corp goes to market at 15 dollars, BLLC corp goes against the secret agreement and goes to market at 10 dollars. BLLC gets ACME corp’s customers as long as they retain their price at 15. Now take the same example and spread it across hundreds, thousands of companies, keeping in mind that this level of coordination would leave behind proof, witnesses, and take an extraordinary level of coordination. Non-participation in a price fixing cartel for a minority company could mean capturing the entire market, and anyone who was participating would immediately be incentivized to exit it.
This is what is being posited, versus the dirt simple explanation that more money has been printed and has thus decreased in value. And we know a ton of money was printed.
Price-fixing cartels aren’t impossible, however, they do become completely impossible to create or maintain at a scale like that. There is simply way too much competition. It’s an extremely elaborate, poorly substantiated theory to explain something there’s an obvious, well-substantiated explanation for already. I don’t know how you guys think about applying the scientific method, but to me, that ain’t it.
This is basic game theory
Perhaps real life is more complicated than something you can read in an introductory textbook.
Just gonna leave these links here.
https://www.theguardian.com/environment/2021/jul/18/america-food-monopoly-crisis-grocery-stores
https://www.webfx.com/blog/internet/the-6-companies-that-own-almost-all-media-infographic/
https://finance.yahoo.com/news/handful-companies-control-almost-everything-152800823.html
Yup, well aware how much monopolization there is.
Here’s corporations in the US by market cap:
https://companiesmarketcap.com/usa/largest-companies-in-the-usa-by-market-cap/
Keep in mind we’re not talking about simply “6 companies dominate a single industry”. The burden of proof for “greedflation” is simultaneous price-fixing behavior across the entire economy. Across essentially all corporations.
It’s called price leadership and it is an extremely well established phenomena in economics.
No… Not to my understanding. Inflation, while an average, is not equally rising across all things. It is possible for the few that control food to raise prices together. Same with clothing and other industries. I think it’s also exacerbated by the shipping fiasco during covid and the fact that corporations always want more profit. As a general rule, any time prices rise for any reason, and shipping can make everything rise together, if people still pay that price, it will not be lowered.
If you’re going to bring in Occam’s Razor, it’s probably less tenable to argue the ‘a conspiracy is more complex than the alternative’ argument when there’s obviously a set of shared motives driving labor costs down while at the same time pushing up profit margins. The fact that profit margins are up does a lot of damage to the ‘it can’t be greedflation’ theory
argument when there’s obviously a set of shared motives driving labor costs down while at the same time pushing up profit margins.
Well, just because they have shared motives doesn’t mean they’re going to act in concert with each other. They’re competitors. One’s market share loss is another’s market share gain.
The fact that profit margins are up does a lot of damage to the ‘it can’t be greedflation’ theory
It might help to clarify what “it” we’re talking about here, or for that matter, what exactly we’re referring to with “greedflation”. To be totally clear, companies will raise prices when the market will bear it, and when they have a monopoly or cartel, that can be nearly indefinitely. The thing I’m objecting to in the first place here is the notion that that’s just universally the case across the entire economy, which strikes me as ridiculous and a way for the government/central bank to deflect blame for monetary inflation. And to your point - for any highly competitive market, it’s a very elaborate explanation versus just that supply and demand has caused prices to increase because the supply of money has gone up, which is a very simple and fundamental phenomenon in econ. As a rule of thumb, the more diversified the market is, the less likely that is to be the case.
We did see a big supply shock when Russia partially cut out of the global energy market, causing the market to chase after oil from the remaining producers, causing an increase in price. That’s not some new phenomenon, that is also just basic supply and demand. It does cause price shocks, even if their costs didn’t go up, even if labor didn’t see the benefit. That’s not, however, some permanent state of “inflation” like monetary inflation which is just never reversed for the entire remaining lifetime of a currency - supply shocks are transient (at least until the fossil fuels actually run out).
The problem with consolidation is that companies that gain a majority market share are operating at the lowest of margins, so there is little room for new competitors to move into that market space.
Since these companies already own the market, it is too expensive for another company to enter that market space while competing successfully. The larger and more established companies already have economies of scale that are tilted in their favor. The only way for a new company to compete successfully against an entrenched business is by leveraging new technology or huge investments to bring their cost lower than their competitors.
And we’ve seen that happen in the past with agribusiness, they get large investments and just buy up all the other companies and put them under their own umbrella.
