What is the cause of inflation? The tricky answer, one that had bedeviled economists and bureaucrats since Rome first experienced inflation when decadent emperors minted more and more currency with less and less precious metals, is that no one really knows.
Generally, it’s dependent on both the amount and velocity of money, that is how much money there is in the system and how quickly it’s being pushed into the economy. More cash being thrown at the same number of goods means higher prices, after all.
There are other factors that matter, of course. Faith in the government is one, as hyperinflation only results when citizens or subjects lose all faith in their government (look at Zimbabwe or Weimar Germany). Similarly, citizen expectations of inflation matter, as thinking inflation is coming means people will try to buy more goods in the present to avoid higher prices in the future, which drives up prices.
But Lyin Liz Warren, aka Pocahontas, has another theory: it’s all the fault of those scary “big corporations.” In her words on Wednesday’s “All In,” an MSNBC program:
“Now are high prices a problem? You bet they are. But there are a lot of different pieces that are going into this. Some of this is companies that are passing along high prices that come from the manufacturing sector that come in their ability to sell goods. But some of this is coming from kinks in the supply chain. And there’s evidence that these are starting to untwist.
But you have to remember, there’s another part to what’s going on, too, and that is these giant corporations who say, wow, a lot of talk about high prices and inflation, this is a chance to get in there and not only pass along costs, but to inflate prices beyond that and just engage in a little straightforward price gouging.
We now live in a time when profit margins are higher than they have been in 70 years. Two-thirds of the publicly traded companies in this country are seeing higher profit margins than they did before the pandemic.
Now, your profit margins don’t go up just because your costs went up. They go up because you saw an opportunity and you said, as the chair of the Federal Reserve said to me yesterday in testimony, why are they raising prices? ‘[B]ecause they can.’
Long term, we want to get those prices more under control. We need competitive markets, and that means enforcing our antitrust laws, enforcing the laws that promote competition in this country that help small businesses compete. That’s going to help us, not just in the short run, but that’s what’s going to help us in the long run too.”
Plus, that’s not the first time Warren has blamed inflation on greedy companies. During Jerome Powell’s appearance before the Banking Committee on Tuesday, one in which he vowed the Fed would fight inflation, she said “We can’t overlook the role that concentrated corporate power has played in creating the conditions for price gouging.”
It’s a dumb take if there ever was one, and even left-leaning economists are calling her on it. For example, Jason Furman, who served as a top economist in the Obama administration said:
“When more people want to buy things than companies are capable of making, prices go up. That’s just the law of supply and demand.
Companies always want to maximize their profits,” Furman added. “I don’t think they’re doing it any more this year than any other year.”
Inflation is about the supply and velocity of money, as well as the public’s perception of the availability of goods, the government, and the future price of goods. Corporations, which theoretically are always profit maximizers, might not be good guys but also probably aren’t the inflation culprits.
This story syndicated with permission from Will – Trending Politics