[r00fus]

This will do nothing for actually impacting inflation. Instead it will crash the economy. Real inflation seems to be due to price gouging by companies[0], combined with energy increases due to OPEC price fixing [1], and rent increases due to collusion [2] and corporate domination housing market [3].

Jerome Powell had no answers to the Senate Oversight committee when asked how increasing rates would actually reduce that kind of inflation because his goal is to crash the economy for his buddies on Wall Street - they have lobbyists at the Fed too. [4]

[0] https://www.theguardian.com/commentisfree/2022/sep/25/inflat...

[1] https://newrepublic.com/article/166752/opec-cartel-gas-price...

[2] https://www.propublica.org/article/yieldstar-rent-increase-r...

[3] https://wjno.iheart.com/featured/brian-mudd/content/2022-02-....

[4] https://theintercept.com/2022/10/26/federal-reserve-bank-lob...

[SideQuark]

> Real inflation seems to be due to price gouging by companies

A IGM poll of ~100 of the world's leading economists pretty thoroughly show that your belief is very, very far to the fringe, more so than just about any other topic. [1]

They answer the "A significant factor behind today’s higher US inflation is dominant corporations in uncompetitive markets taking advantage of their market power to raise prices in order to increase their profit margins." with 2% strongly agree (with 3% confidence in this answer), 5% agree (7% confidence), 19% uncertain (12% confidence), 51% disagree (52% confidence), 16% strongly disagree (27% confidence), and 7% of no opinion or did not answer.

As to economic questions posed to this forum, this one is pretty slam dunk to the side opposite your claim.

Reich is about as far to the fringe of economists you can find. Try reading more widely. This forum is a much better place to get information about economics than opinion pieces in papers vying for views.

Real reasons for inflation: trillions were added to keep people afloat during COVID, and prices have gone up due to supply chain issues and the war in Ukraine.

If companies could simply raise prices willy-nilly, they'd have done it already.

[1] https://www.igmchicago.org/surveys/inflation-market-power-an...

[whimsicalism]

> Real inflation seems to be due to price gouging by companies

Yes, it is too bad that our previously benevolent corporations all decided to end that benevolence in the year 2021 and gouge prices.

> crash the economy for his buddies on Wall Street

Of course, exactly what Wall Street wants.

[wcarss]

It wasn't said that corporations were good but now are not, and it is not a requirement for the above to be relevant or true.

The theory is that corporations will price at the highest price the market will bear and know that price from price tests they are willing to perform. "Inflation in the air" gave them all an impetus to more aggressively explore the space of prices consumers would bear, and it turns out, people who eat chips mostly won't stop buying them when they're 1.5x the price and the packaged weight is cut by 25% over a 2 year period -- and the same follows for a huge number of similar goods.

This is an acceleration of processes that were already under way, but it's also likely enabled by, likely not directly caused by, and likely feeding into "inflation", and it's likely not something that rate changes will directly impact -- though, maybe a second order change, e.g. a crash to the economy, could hurt workers to such a degree that they simply cannot possibly both buy chips and live. That might finally curb price hikes and would indirectly have fought inflation.

[whimsicalism]

The straightforward solution is that measurable surging consumer demand in durable goods allowed firms to set higher prices.

Your theory around sticky prices doesn't explain firms running out of things despite keeping increasing inventory.

Certainly, prices can be sticky and may be less sticky during the pandemic but firms still have to compete with each other on cost.

[whimsicalism]

It doesn't take a genius to see there is spiking demand

https://fred.stlouisfed.org/series/DGORDER

[guyzero]

It's an unexpected result that shortages of core consumer goods - specifically gas and food - cause a rise in prices due to demand but this has become more decoupled from underlying input costs thus... high corporate profits in these areas. It's true that Exxon isn't any more or less rapacious than ever, but their profits are objectively much, much higher.

[whimsicalism]

Of course it depends on the market but many of these "shortages" are only relative to record-high consumer demand for durable goods.

Yes, during periods of extremely high demand relative to current supply, profit for suppliers increases. This encourages new entrants to the market who can help boost supply.

This is just the basic functioning of the economy and price signals in action. If producing things in short supply weren't profitable, that short supply wouldn't get resolved.

[guyzero]

Gas prices are significantly higher than 2019, total vehicle miles travelled are about the same (https://fred.stlouisfed.org/series/M12MTVUSM227NFWA) so there must be a reduction in supply or just straight price gouging to justify the price increase.

[whimsicalism]

There are both supply shocks and demand shocks. Gas prices are definitely undergoing a supply shock right now, which contributes to the price increases (and which the Fed can't help.) But there are also broad-based demand increases.

[guyzero]

I agree with your first statement but per the data on aggregate miles travelled I disagree there's actually a demand increase. Ultimately the Fed can't control either supply or demand directly but they try to indirectly control demand by increasing the cost of borrowing. Will it work? Consult your magic 8 ball.

[sokoloff]

Is there some shortage of oil or gasoline that I'm not aware of?

[hornd]

This is the current talking point du-jour of the American progressive left, but I think it's safe to say the Fed knows what they're doing and have done this before.

[connorgutman]

Ah yes, the almighty Fed which knew exactly what to do in 2020, 2008, 2001, 1990, 1987...

[SideQuark]

Yes, the Fed that stopped the much longer, more frequent, and deeper panics and recessions that occurred before it.

In fact, it did so well for so long compared to previous methods, that the Great Moderation is a term in economics for the stability it gave.

Instead of snarkily listing places you think it failed, compare that to pre-Fed failures, and you'll see that the Fed is a lot better than other solutions.

And there's ample economic evidence central banking is much better than anything before it, which is why every single country in the world has adopted it.

https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit...

[HPsquared]

The Great Depression wasn't so good.. that came after the Fed.

[SideQuark]

One example does not negate the evidence I just posted including 51 examples, nor does it change the vastly better trends under the Fed.

So why pick a single event, ignore 50 others, ignore the trends shown in US (and 100's of other country) datasets, covering hundreds of years?

I just posted a decent intro to the evidence. Please read it. The economic evidence for the benefits of central banking versus not having a central bank are so thoroughly answered in economic literature that not a single country is stupid enough to go without one, despite those 100s of countries having a lot of other variety.

[moistly]

Because feels before reals is how so many people live their life these days. Reality doesn’t let them blame the people they want to blame, or reality doesn’t assuage the fears they fear, or reality doesn’t let them feel smarter than everyone else, so they fall back to empty platitudes and fantasies to protect themselves from reality.

[whimsicalism]

2008 was clearly a failure for the Fed but I would love to see the counterfactuals of no Fed action for many of the other times you are mentioning.

[r00fus]

The "Fed" isn't some apolitical entity. It's lobbied and banks want to crash the economy so their wealthy clients can get in at the bottom.

They have an agenda.

[whimsicalism]

Those wealthy clients are already heavily "in." You can make up motives for anything, I guess, but the obvious motive for the Feds actions is surging prices.

[WillPostForFood]

>banks want to crash the economy so their wealthy clients can get in at the bottom

This is like the left wing version of q anon craziness. Banks don't want the economy to crash - they are big losers when it crashes.

[r00fus]

This is your point to prove. I proved Fed gets lobbied (see GP comment).

[yunwal]

Banks are big losers when the economy crashes and they don't anticipate it. Overall if there's no turbulence there's no way to make money as a bank.

[megous]

"Crashing the economy"? Any definition of that? It's not like it's a car or a plane. Some metrics will be 5% different than before?

Sounds like fearmongering, to me, this kind of language.

[whoooooo123]

If inflation is caused by selfish companies raising their prices, why are they only doing it now and not, say, three years ago? Did they only decide recently that they want to make more money?

[xhrpost]

It's a good question, seems like corporations have more power to do so now, from linked article:

>Corporations have the power to raise prices without losing customers because they face so little competition. Since the 1980s, two-thirds of all American industries have become more concentrated.

[whoooooo123]

Hmmmm, I suppose we did just spend two years crushing small businesses into the ground, so I imagine that big corporations do have less competition than ever at the moment.

[nightski]

I like how the law of supply and demand in economics has been renamed "price gouging" by democrats.

[yunwal]

Laws of supply and demand work very differently when dealing with monopolies/consolidated industries and inelastic goods. Laws of supply and demand only work "how they're supposed to" with either perfect competition or perfect elasticity. So yeah, people don't like that companies are getting away with destroying competition so they can jack up their prices.

[SantalBlush]

You're not wrong, but we see the same thing with the "labor shortage" rhetoric, which is just conservatives and business owners refusing to acknowledge supply and demand in the labor market.

[yunwal]

Both are valid concerns when demand is inelastic. I'd say this is true in regards to essential goods and services (you can't choose not to buy medicine or healthcare). I have yet to see many cases where it's true for labor. It seems in most cases companies can either implement new automation or just choose not to run as much if they have a labor shortage.

[ren_engineer]

energy companies are simply acting rationally based on the fact that governments have made it clear they want to eliminate them, short term profit maximization is logical. Why would oil companies invest in refineries that will not only cut their profit margin by increasing supply but be shut down by the government in 20-50 years making the investment worthless? This is logic a 5 year old can understand but apparently is too much for the current executive branch to grok

every single current economic issue is a direct result of government actions during the pandemic and trying to achieve long term ideological goals that weren't based on rational decision making

[metabagel]

None of what you wrote makes any sense to me. Almost without exception, corporations don’t plan 20 years into the future.

You left out supply chain disruptions and consumer demand fluctuation due to the pandemic.

It more seems to me like you have an ideological story you’d like to sell.

[lamontcg]

> This will do nothing for actually impacting inflation. Instead it will crash the economy.

This is literally nonsensical.

Businesses will lose pricing power in a recession and will slash prices. Nobody will be buying new cars and their prices will drop, the used market will similarly drop until it finds a new floor. People who are out of work and can't afford their car payments will flood the used car market, etc. Multiply this by all the other goods markets. Same things for rents as people get fired and move back in with their parents or move out of the expensive cities.

I think I've responded to you before and I think you've got a nonsensical opinion that price gouging and inflation are in opposition to each other, when they just aren't. If prices rise, that is inflation. If prices rise due to price gouging because demand is inelastic, then that is also inflation. If the fed crashes the economy that will be deflationary and cause a recession, that will reduce prices. Companies can only collude to pump prices when they have inelastic demand, once the economy contracts sharply they have to defect and slash prices again.

By crashing the economy Powell intends to break the back of the nascent labor movement and by dropping asset prices will allow the rich to buy up more of the country.

[intrasight]

> This will do nothing for actually impacting inflation.

Correct and incorrect. You are correct about the causes of inflation. But it's the Feds mandate to tame inflation, and their only tool is rates. The correct solution would be for congress to act - but they won't.

[WillPostForFood]

It already seems to have had an impact on inflation though - we are in a much better place today than 6 months ago with inflation. If real wages decline, and housing declines (both tied to interest rates), then rents will decline. If we need to get energy prices down, we have abundant domestic supply waiting for extraction. High prices are currently a executive branch policy choice.

[yieldcrv]

> his goal is to crash the economy for his buddies on Wall Street

nah, any avid trader can take any direction of the market to capitalize on any opportunity

it doesnt matter what someone is lobbying for

when he was increasing the fed balance sheet, who do you think he was buying from and giving free money to at every transaction? his buddies on wall street

its the same any direction

[bergenty]

Raising rates will curb people’s savings and consumer cash in general. This WILL reduce inflation.

[stu2b50]

Crashing the economy would ease inflation though by cause a big demand hit.

[ok123456]

Our current inflation isn't being driven by demand, therefore decreasing demand won't be an effective lever for dealing with it.

[scotuswroteus]

Can't wait for your even handed replies to being challenged on literally anything here, lmao