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Comment by kshgad | Hacker News Reader

This is an overdue submission from mainstream media. The good thing is that this particular inflation example cannot be denied.

33% increase in food prices can be seen in many other products. The general inflation is of course due to reckless COVID spending and rising energy prices as well as reckless and ineffective sanctions.

33% increase also applies to health insurance in Europe as well as rents.

Now, I wish we had journalists who would pick up these issues in a timely manner and not two years after the damage has been done and is too big to ignore.

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>The general inflation is of course due to reckless COVID spending and rising energy prices as well as reckless and ineffective sanctions.

Reckless spending played a part, but a major (if not the biggest) component was every company getting it into their heads to "test the price advantage" of their products. This amounted to jacking up prices knowing people would suck it up and buy, lying that it was "supply chain" forcing their hand, and simultaneously posting record profits every quarter for three years after the vaccine dropped.

> component was every company getting it into their heads to "test the price advantage" of their products

This happens all the time. Companies are constantly maximizing greed. What allowed the price increases is the available cash (due to reckless spending). If customers hadn’t been able to pay, then companies wouldn’t have increased prices.

I hear this comment a lot and it’s like saying “bob didn’t die from smoking, he died from the giant tumor.”

Then prices will drop because without the infusion of cash consumers won’t be able to afford the inflated prices, right?

If the inflation is strictly caused by "corporate greed", and not by an expansion of the money supply, then yes, the prices would drop.

If the inflation is caused by an expansion of the money supply and "corporate greed" is merely the proximal expression of this, and central banks do not decrease the money supply as quickly and as much as they expanded it by, then no, higher prices are here to stay.

Time and reality will tell, no need to argue this out here with people who've already emotionally made up their mind and cannot be reasoned with through rational conversation.

I agree and I think we should start ore clearly distinguishing between inflation and price gouging. Both are going on, but when we blame everything on "inflation" we're really just letting the government be the fall guy and letting corporations off the hook for whatever increase they are doing beyond the currency's actual inflation.

Strongly disagree - the price increases were possible because people are strongly resistant to decrease their quality of life. e.g.: they'll pay significantly more of their income to maintain the same level of diet and travel up to the maximum they can afford (and beyond with debt). Rather than scaling back spending and reducing social status and leisure. This isn't even irrational, as status is linked to concrete health benefits (e.g.: Whitehall studies on cardiovascular health). There's been price matching across the food and service industries, due to consolidation and oligopoly - themselves a result of financialisation. So you have the whole food industry for example, responding to the supply shocks of covid by increasing price - then realising that demand elasticity doesn't apply if they act in unison.

> ...then realising that demand elasticity doesn't apply if they act in unison.

So you're not actually disagreeing?

You have companies like Kroger whose prices are out of control. One way to save significant money is to avoid them if you can.

If they have a competing grocer it is always drastically cheaper...free tank of gas per shopping trip cheaper.

They are salivating over this Albertsons merger. Easy money. Thank the gods for Walmart.

Consolidation and oligopoly aren’t new in the past 4 years. What is new is the trillions of cash injected into money supply.

Greed is constant. Consolidation started in the 90s and the same 4 grocery companies have owned the market for 15-20 years.

They only have ability to increase prices because consumers have more cash to spend. They would have loved to do this 5 years ago, but random $30k household income families of 4 didn’t get $16k handed out to them. (Two $2k/person stimulus rounds in 2020 and 2021)

This is happening cross nationally - and very few nations gave out covid payments similar to the US.

Side node - this is just a strange lens, for most people in Ireland (where we did receive covid payments) they were making up for work which had evaporated. Why is it always assumed to be additional to income in the US?

Not true actually. Many/most countries did massive increases in money supply. [0]

I don’t know exactly how each country compares to the US and was only using the US because of others in thread and that’s what I know best.

In the US it’s assumed to be additional income because you can measure money supply and see the increase. So it’s a correct assumption because there’s just much more cash. If it was replacement, then money supply would stay level.

Also, in the US direct cash payments weren’t need based. Everyone got them despite income or necessity. Personally, I stayed employed, got overtime, and got $8k+ in direct cash deposits. Just an anecdote, but everyone I know got similar payments. So it always seemed odd to me that yuppie programmers got wads of cash. The rationale made sense as they needed to help people quickly and qualifying would slow things down.

But this is a macro example of inflation drivers. So anyone with basic economics training would recognize this example. Arguing otherwise seems silly, without lots of evidence.

Corporate greed is constant and universal.

[0] https://www.investopedia.com/government-stimulus-and-relief-...

No, it doesn't happen all the time. Grocery prices are very sticky. Consumers notice when bread prices go up from $2.00 to $2.10, and they'll switch brands to avoid the increase.

That's why you get shrinkflation, small changes in quantity aren't as easy to notice as price changes.

Wealth extraction is pretty much what I expected the real reason was, and all the profits went to shareholders and was not put into the economy in any real sense (I'm going to preemt the pension fund strawman here).

You also see massive shrinkflation (e.g. you know buy 3 bags instead of 2 for a lot of products) which has the same result.

> Reckless spending played a part, but a major (if not the biggest) component was every company getting it into their heads to "test the price advantage" of their products

What makes 2022 so unique that just now corporations figured out they can raise prices? Why haven't profit margins taken off in 2022 [0] ?

These always struck me as bad explanation. Mostly hand waving. I think a more reasonable explanation is that increasing the money supply over 30% in a few years resulted in prices and asset levels going up ~30%.

[0] https://www.gurufocus.com/economic_indicators/62/corporate-p...

> What makes 2022 so unique

COVID was the omni-excuse. You didn’t have to say “we’re raising prices because we want to make obscene profits.” Instead, you could shrug sympathetically with the customer and say, “well, you know, times are tough. It’s hard to get the things you need, and we’re trying to get this at a price as affordable as we can… oh, also, hit the tip button on the screen from now on because our staff are working so hard through the pandemic and it’s so hard to find help (at the price we want to pay).”

Never underestimate a good story.

So why didn't profit margins go up to "obscene profit" level?

The article is arguing that they did through royalty fees.

I don’t know the answer, but I have noticed something clearly rather odd going on in the grocery sector/industry, an industry that was probably the least affected by the lockdown command economy than any industry and by far margin.

There is one niche but growing discount grocer that effectively has prices similar albeit elevated, from pre-lockdown prices, while other larger, mainstream general grocers have far higher prices, as measured by staple goods like eggs, milk, beef, chicken, etc.

Yet no one in the mainstream is willing to admit that wild inflation was largely a result of out of control money printing. Usually, this leads to asset price rise (which has outpaced inflation for decades now).

But this time, there was so much money sloshing around that it pumped assets to prices that were beyond the market’s absorption (see home prices). Once there were no quality assets left to buy, the money found its way to garbage assets (NFTs, crypto) and consumption

Admitting this would mean admitting that the foundations of the western capitalist system are weak. Little wonder why the blame is deflected to a million things, but NEVER money printing and esoteric money juju such as QE

First, the increase in the McD burger price over those 7.5 years constitutes around 4% p.a. That's certainly not great, and twice the usual inflation target, but not catastrophic.

Second, there was no "out-of-control" money printing in Australia, see [1].

Third, if there was out-of-control money printing (and there was some loose monetary policy, and at the zero lower bound this does involve expansion of the central bank balance sheet, ie QE), it was after the GFC in 2007 [2]. However, there was no inflation for a decade and a half after.

But then, the pandemic and the Ukraine war hit. Now you had supply constraints (reduced production and logistics challenges) and also increased demand (due to fiscal easing (stimulus, subsidies) during the pandemic, and people "catching up" on spending afterwards). And then there was a short bout of inflation.

Why do people keep complaining about money printing if that's not the cause for inflation?

Fourth, you find extensive discussion of all these issues in utterly mainstream media.

[1] Here's M1 and M3 for Australia (log scale).

https://fred.stlouisfed.org/graph/?g=1riAu https://fred.stlouisfed.org/graph/?g=1riAC

[2] US Fed Assets (log scale)

https://fred.stlouisfed.org/graph/?g=1riAC

Did you miss the part where I said that out of control money printing finds its place first in asset prices?

Go look at the inflation in Australian home prices since 2008

> Health insurance in europe

Uhhhhhhh

Prices here have rizen from about 100euro/month to about 150/month in 6 years (2018 was easiest to find the numbers for).

Are you under the impression that healthcare in every country in Europe is single-payer or socialized?

By the same token, generalizing the whole of Europe to say "33% increase also applies to health insurance" is a very broad brush.

I live in Germany and I pay a little over 700 euros a month for health insurance (not private, but the system of "statutory" health insurance company)

For statutory health insurance in Germany, what you pay is tied to your income, not to the cost of health care or your risk (age etc.).

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