We need to talk about the real reason behind US inflation | Hacker News Reader

We need to talk about the real reason behind US inflation

theguardian.com

> But they’re raising prices even as they rake in record profits.

Ray Dalio recently wrote that "Wealth == Buying Power"[1], and notably record profits when denominated in a devalued/devaluing currency doesn't mean much.

> Or consider another consumer product duopoly – PepsiCo (the parent company of Frito-Lay, Gatorade, Quaker, Tropicana, and other brands), and Coca-Cola.

This isn't just on supply side with 2 "evil" companies raising their prices, but also on the demand side (elasticity). People need to wake up and stop being such automatons for their choice brand...

Anecdotally i've observed people (imo irrationally) be so automatic with grabbing at what they're used to -- for example their choice coke/pepsi -- without considering alternatives and the marginal value. If the off brand soda is sitting on the shelf beside and it's 1/2 price this week on a sale, why not grab the cheaper option?

There has been a trend of yolo/nihilism/hedonism that suggests "treat yourself", "it doesn't matter", "my pleasure in the cola is worth it" in my and younger generations which is creating a brand loyalty/inelasticity which allows companies to take greater and greater shares of wealth away in exchange for nearly nothing.

[1]: https://www.linkedin.com/pulse/inflation-wealth-ray-dalio/

Why not grab the other brand or the off brand? Because they aren't equivalent. I like Pepsi. I don't like Coke. I just don't. I don't want to learn to like it in case it's the one that's on sale this week, either.

> I like Pepsi. I don't like Coke. I just don't. I don't want to learn to like it in case it's the one that's on sale this week, either.

And this speaks to my actual point, demand has become less elastic than in the past, so these companies can actually demand _any_ price, up until you'll concede your taste preference.

I won't concede my taste preference. I might drink less of it, though...

Fifty years ago, an acquaintance came back from college, where he had been taking accounting or economics courses, and told his mother that should could save $x/year by buying the store-brand salad dressing. She replied that $x/year (probably under $10 then) wasn't worth it--she liked the name-brand salad dressing.

The TL;DR here is that the US economy has a lot of areas that are dominated by very few companies. Those companies are using the pandemic and the current inflation narrative as an excuse to raise prices, because they can get away with it due to lack of competition. In other words, many US markets are not even close to being free markets, in which one couldn't get away with this sort of thing.

Oh, and BTW, although this is an opinion piece, Robert Reich is a former US Secretary of Labor and teaches economics and public policy at UC Berkeley. He's also a pretty cool dude, from what I hear.

I do wonder how much of this lack of competition is also due to consumers not trying alternatives? (as discussed in my post[1])

[1]: https://news.ycombinator.com/item?id=29203518

That's a good point. But, part of the problem is that, in many cases, the "alternatives" are just made by different parts of the same conglomerate. In other words, "choice" is sometimes illusory. See https://www.theguardian.com/commentisfree/2019/jul/29/starbu... for example.

It's particularly interesting that the article either failed to mention house brands / non branded alternatives. (or the numbers are so small they weren't worth mentioning...) For example I'm not talking about pepsi vs coke vs mecca cola, but something like Safeway Select or Walmart Great Value. As a consumer I would expect that to be the happy place for, no pun intended, great value for my money. These brands have nothing to offer but price and quality, and so I expect to get an excellent compromise of the two.

There is also the problem that huge competitors can create value deserts via hyperoptimization rendering less optimized competitors from even getting a foot hold.

True reason for inflation: FED and insane printing of money.

When something’s too expensive I don’t buy it. There are almost an infinite number of substitutes for almost anything.

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