Is It Stubborn, Or Is It Something Else
I don’t need the NYTimes (actually, it’s now the Washington Post) or CBS News to tell me that this “Stubborn Inflation” is still with us.
You can go to any store and see inflation at work. Prices are rising still. maybe not like 2021-2022 but they are. My Philadelphia Cream Cheese example is still very true and very powerful.
Usually, after an massive inflation cycle three things happen:
Price rises slow and start to decrease a little. This deflation happens when the economy stops growing and demand slacks off because peoples wallets never caught up to the price rises and they just stop buying certain things. Producers produce and they need to get the stuff off the shelves and prices come down. Rarely to the starting point but close. This may be a relief to consumers but for producers and employers, it’s a bad sign. The result is usually a recession.
The second thing that can happen is prices stabilize and producers use enticements to get shoppers to buy their products, coupons, discounts for weekly sales etc. Get people to buy things by giving them a deal. It’s a short term situation but it does help move products off the shelves and while the consumer may think he is getting a deal, the prices after said deal are usually higher than before the inflationary spiral started.
Producers keep prices high. Offer no deals. Hoping that the wage increases have caught up and families feel comfortable in their purchases. People earning more money, spend more money. Shareholders of these companies are also happy because that inflation fueled earnings growth cycle will continue.
I think we may be in this third phase. The economy is still doing well in many areas and people continue to spend. Wages have almost caught up to inflation and households are for the most part, employed. Working people will spend what they need to spend to feed, house and clothe their families.
Expanding that a little, if a household is fully employed and the prospects for continued employment are good, that household will spend more than it earns and become potential new home buyers, new car buyers and new upgrades in living.
It is the confidence that people have that creates am expanding economy.
When that slows are reverses, then all Hell breaks lose.
Their is your Econ 101 lesson for today.
Things are way more complex than that but at it’s core, that is how our economy has worked since probably the 50’s.
Circling back to inflation and it’s stubborness is more complex and my theory about why prices remain high when there is absolutely no reason for it.
Over two years ago and multiple times after I stated that producers were increasing prices because they could, not because they had to.
Yeah, yeah, yeah, The Pandemic, The Russian Ukraine war, the supply chain mismanagement. I get the White House and their media minions excuses and explanations but the facts remain now, there is absolutely no reason companies are raising prices on anything.
Let’s go back to the easiest example I have given; Eggs. This country eats a lot of eggs. We have a lot of chickens that produce a lot of eggs. The chickens produce a lot of eggs during good times and during bad times. Like a cow, they just do what comes naturally. They make eggs. We buy all of those eggs and they keep producing them. They will never stop making eggs.
Then why is the price of eggs rising again?
Avian flu I hear. They had to kill 800 billion chickens or some bullshit number so now there are less chickens laying eggs and Americans keep wanting to eat the eggs that all those dead chicken aren’t producing. Demand is outstripping supply. I say bullshit again. There are just as many eggs in my grocers refrigerators as there were 6 years ago, three years ago. The prices are higher, thats the only difference.
Eggland and their parent Cal-Maine controls roughly 75% of the egg market in this country. Hmmm, the DOJ doesn’t think there is something wrong here?
I was kidding about the mass extinction of all those chickens because of some strain of avian flu. Considering that there are over 40 billion chickens laying eggs in this country and this strain of flu has not infected one chicken, what gives?
It is market manipulation by a monopoly. Normally, I cast a dubious eye on any attempt by the Justice Department regarding supposed monopolies but when one conglomerate controls 75% of the market in a staple I do think there should be some investigation.
Great lobbyists? Congressmen and Congresswomen own shares in Cal-Maine? I don’t know but without going too deep into politics, I think there is some political connection protecting this company and it’s business model. Where is 60 minutes digging up dirt on this?
What is surprising (or maybe not) the company is headquartered in Mississippi, maybe the most Republican state in the country.
I love companies that do everything and anything to protect their bottomline but when you mess with eggs, thats when I draw that line in the sand.
The overarching point I am trying to make is that inflation is not stubborn, it is being propped up by producers who do not fear anyone or anything calling them on the carpet.