Inflation Blame Game is Tricky

Corporate Responsibility Disparities Financialization
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            New Orleans       Driving from Houston to New Orleans only days ago, we ran into gas stations that were selling for $3.59 per gallon at the pump.  In and around New Orleans, we saw prices between $4.19 and $3.69.  That’s a pretty big spread.  For a lower income family that could add up to a quarter of their income, if the prices stayed as high as they were only weeks ago, but they seem to be dropping.  Home energy bills are still high, but given problems with many of our local utilities, I stay skeptical, especially when I see costs outside of the Entergy system still staying about the same.

What’s really going on with inflation?  What part of this is pandemic and post-pandemic driven and related to supply chain disruption, and what part of this is rent-seeking and profit-taking by business?  It’s hard to sort out, but it makes sense to keep your trigger finger steady, because the answers aren’t simple or clear.

One thing that is clear is the domino effect of oil and energy prices rising.  The impact charts directly into the increase of some food prices like milk and butter-based products, where farmers reacting to rising transport costs slaughter more cows to keep from shipping.  Estimates are that 100,000 milk cows were lost, which means, yes, you got it, less milk and a jump in milk and butter prices, according to the Wall Street Journal’s evaluation of the “true costs of inflation.”  If prices at the pump drop, that will send waves down the supply chain, reducing some of the price spikes that weren’t just profit-taking.

It’s also pretty clear that the pandemic was a head scratcher for the big boys, and they made a lot of mistakes.  In the classic supply-and-demand equations, they were guessing wildly, just like the rest of us, about when this would end, and what it all really meant.  People were home, so they bought fewer cars, and when they started buying and renting again, the stock wasn’t there, and the prices soared.  When folks were at home they bought new computers, TVs, and other tech, so prices there have now dropped due to oversupply since people are increasingly back at work.  Numerous reports indicate that Walmart, Target, Gap, and other huge retailers over-ordered and are diverting some shipments now that are hitting the ports on the coasts directly to discounters, because they don’t have the warehouse space for the excess.

Consumers invariably pay the price for corporate errors.  Wall Street is already betting that interest rates will drop next year, and that looks like a safe wager.  It’s also a pretty sure thing that once corporations move the price of goods up, in many areas they will take their sweet time bringing them back down, if they don’t have to do so.  Inflation may not be here to stay, but the cost of some goods and services might be more permanent than we might like, if they can get away with it.  Not that this will make anyone happy, but it’s worth a lot of caution before assigning blame to politicians, if they are simply the straw man for the CEOs who are really pulling the strings on pricing.