GREEDFLATION: Causing inflation or fringe theory?

Ever since inflation settled in, there has been a blame game happening among pundits, economists, and politicians. There seems to be two concepts garnering broad consensus across the political spectrum: 1) There is more than one reason for the current inflation, and 2) The coronavirus pandemic had a lot to do with it. Another argument around drivers of inflation has been more hotly contested and carries much more interesting ramifications. That's the role — in one way or another — of corporate greed, or 'greedflation'. Today, we will take a look at views from those who believe 'greedflation' is having a big impact on inflation and those who believe it has no impact at all. Then, I'll give you my take.

Today's Clickables:
Intro: 00:00
The Basics: 00:51
Greedflation is Real: 05:00
Greedflation is Not Real: 09:47
My Take: 16:13
Question for the Viewers: 20:27
Reader Comment: 20:36
"Behind the Scenes": 22:29

Love what you see? More Tangle here:

[just__ryan_]

Dear YouTube Algorithm, please give this channel more subscribers and views. Thank you.

[reganbarnes]

I don’t know a lot about economics, but I do know that I’ve struggled to keep my grocery bill under control. I’m trying to buy cheaper items to make it work. We’ve also had increases in electricity, trash pickup, and internet. We have a small business, and so could raise (and have raised) prices, but it doesn’t seem like we are keeping up with inflation. It seems like a vicious cycle from my perspective.

I really don’t want to complain too much though. I realize how good I have it compared to a majority of the world, and I count my blessings. We have never lacked for any basic needs.

[EntertheCultiverse]

Greedflation isn't a bug in the system, it's a feature. I run a small business and, like large corporations, we have to jump at any opportunity to increase profits. It's the nature of survival in a competitive economic environment. Think of businesses as plants or animals, but instead of food, water and sunshine, they need money, talent and power. It's all pretty natural, right? Right. Except at some point in the process of survival of the fittest, the less fit see diminishing populations and risk extinction while the more fit flourish. For decades now, the more economically fit have flourished, and will naturally gobble up more resources at every opportunity. If we don't want that to happen, we have to change the environment. And I'm not saying tear down capitalism or anything, but we must find ways to limit the ability of the "fit" to continue to gobble up the money, talent, and power.

[brianbickhaus]

I've worked in Fortune 500 companies long enough to know that corporations are extremely greedy. Greedflation exists and it's going to make inflation extremely difficult to deal with.

[cdf]

Seems important to differentiate elastic demand unnecessary items and inelastic demand necessary item price increases. Elastic items seems fair but inelastic seems like unethical greed. Also, most companies have higher profit while having lower volumes. Doesn’t lower volume indicate lower demand, thus its greed?

[KarenHand-ll]

Good discussion of greedflation. My conundrum is that for many goods, the consumer doesn't have options when prices rise. Higher profits are sustained by the affluent and bring angst to the majority of wage earners. Other than resorting to lower quality and/or sale items, what choice do consumers have? Yes, the dollar speaks volumes but everyday items need to be bought.

[Lisa-olih]

Thank you so much for making this into a video! I can't afford a subscription yet so I was bummed when I saw that this was this week's Friday topic for subscribers only.

[tmftt]

The new spooky phrase of “supply chain issues” was used to justify price hikes and all we could do was nod along like we knew what that was. ‘Too few goods’ seems off as well. McDs don’t run out of food. luxury goods are limited not the stuff we spent money on.

[buffal]

Ok. But your target seems to be huge corporate America as the only culprit.
I've seen dining prices absolutely skyrocket in the last couple of years. For even pizza joints and casual dining. A $12 pizza is $17 or $18 now. It's nuts. And when inflation subsides, do you think those prices will ever come down in tandem? HA! They are staying that high at a minimum forever.

[salvador.garcia]

Of course, supply shocks create uncertainty and wholesalers, as intermediaries, take advantage of producers and buyers with uncertainty, speculating in their own favor (although also serving as insurance where banks don't reach).

And of course, some sectors that have seen their costs increase less, are also taking advantage to raise prices quickly; but they could do it so sustainably (in markets without network goods), if it were not for the excess aggregate demand in the economy. This is demonstrated simply by looking at the difference between how the nominal NGDP has increased and the actual NGDP; as simple as that. Corporations are greedy 24/7, but just sometimes monetary and fiscal policies cause inflation; the fault is theirs.

[cman]

For Greedflation theory, one has to dig deeper to some points that could be made in favor.
1) Corporate Monopolies → (Insert the corporate overlord here). I would expect under normal capitalism with competition that if a company cut production and raised prices (not because of inputs) then they would be crushed by the competition who could raise prices slightly and increase production to gain market share. Haven’t really seen this problem being faced in the markets (AKA Microsoft going out of business and being bought by Ubuntu for example).
2) Never seen deflation here like in Japan, but Japan is unique in as it’s a shrinking population where the US is not. I never bought into the labour/labor market doesn’t have workers to fill existing positions but I do buy into the argument that companies don’t want to pay a worker at a price so yes in United States you have to pay a software engineer more than a 1.00 a day. Hence the offshoring like crazy for that industry and H1B visa’s. I know that prices are sticky but a wave of inflation like we have seen I would expect a little deflation as the pendulum swings or a long period of price stability (near zero inflation). I base this on wage growth for skilled workers, which have been flat for decades now. I don’t expect this to be the case in reality however. What I expect is that consumer purchasing power will decrease and corporations will decrease production but still be able to raise profits and prices. Sounds like stagflation, which was a unicorn in the 70s until it happened. Maybe this Greedflation will be the same and/or have a correlation?

Against Greedflation theory, I would say the main stay points in the video would be where I land also. The economy for the United States is in a weird place and I do believe that greed/laws/to big to fail/etc has landed us here. The truth is probably somewhere in the middle as the world is not a place of absolutes 100%.

My summary, there are corporations that are using the Greedflation tactic and others that did not. How many and what side of the scales do they fall in is probably more for debate. So I would move Greedflation from theory to a tactic that some monopolies are allowed to use without recourse.

Great video and enjoyed it!

[jnwilliams]

Robert Reich offers his perspective stating that greedflation is primarily responsible.

[zoltanpuskas]

You can add the Government to this list. Costs of parking, building permits, business licenses and a host of other (user) fees are increasing too. Greedy Government?

[elmaguel]

I think this might be an example of how capitalism is not perfect. The wisdom of the market is not necessarily what we all need as a society. The system is working as expected, but a large share of the people is worse of because of it. I'm not smart enough to know how to fix this, but I do believe that it needs at least some tweaking. As Churchill once said about democracy; it seems that at the moment capitalism is the worst economical system, except for all others systems that have been tried.