A viral $22 burrito explains inflation in the US

That's the irony, "if their costs go down", never happens.

The permitting fees and time to open a restaurant in SF are astronomical. There is also a finite amount of space in SF, so the owner can collude or otherwise engage in price fixing using his existing market position. also, the owner can drop prices and sell at a loss or near loss and force you out of the market if you somehow manage to get the permits.

If I got a dime for every time someone believed markets work in practice like they do in theory I'd be rich, except for the fact that someone else would be willing to do the same job for a nickel.

This is literally what's happening as that's what it costs at El Farolito next door. People are willingly forking over twice as much for this burrito because they want to or don't know any better.

I mean, there's no singular smoking gun. It's all of these factors at once, and as such, there's no simple remedy for it.

We could outlaw war and drought, I suppose.

We could have more labour done by indentures and slaves, that might drive the wage part of the equation down.

We could tax or seize the profit margins and redistribute them to the people buying $22 burritos.

Or we could just live with the understanding that this is a Premium Burrito (tm) that should only be eaten for weddings or birthdays, and it's not supposed to be affordable.

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(I make Premium Burritos at home for a lot less than $22, but I also don't have to pay myself - or shovel money into rent for a hip storefront... Or raise prices by $5 because my ingredient and labor costs went up by $2...)

War in Ukraine raises prices of wheat, fewer people buy wheat, more people buy rice, price of rice goes up.

Or at least, that's the reason for why prices were up in 2022.

We're no longer in 2022, though. In 2024, wheat prices are ~the same as they were in January 2020, but rice prices are ~50% higher.

Whether you want to attribute that to price stickiness due to the war, drought conditions in Asia, or spirit animals, that's up to you.

Russia -> Ukraine for a variety of reasons.

Russia produce(d) a significant amount of fertilizer which is required to keep much of the world's breadbaskets and farming functioning such as farmland in Brazil. Less fertilizer means less yield from land which has cascading affects into prices of various inputs. Lower yields of onions, tomatoes, etc will raise the prices of the product.

One of Ukraine's exports was wheat and sunflower products. The absence of wheat from a major producer puts the rest of the world in competition with your wheat products. In addition to bread products and much of the middle aisle of your grocery store, wheat products also go into animal feed. Higher inputs to your animal food costs.

Most "quality" beef is grain-finished in the US (this is not a debate about if grain finished makes better steak, its' just a reality in restaurant supply). If you have more expensive wheat inputs for your higher quality beef, prices go up.

Can't escape thermodynamics.

It's also 4 years later. Even if inflation had stuck to the 2% levels we had prior to COVID, we would expect prices to be almost 10% higher today just due to baseline inflation.

That's what is fueling the wage growth part of what I listed.

All other things being equal, pumping money into the system doesn't cause tomato prices to rise by magic. It does so through higher wages.