“Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.”

— Ronald Reagan

“Inflation is taxation without legislation.”

— Milton Friedman

“The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.”

— Ernest Hemingway

“I do not think it is an exaggeration to say history is largely a history of inflation, usually inflations engineered by governments for the gain of governments.”

— Friedrich August von Hayek

“There are only three ways to meet the unpaid bills of a nation. The first is taxation. The second is repudiation. The third is inflation.”

— Herbert Hoover

“I continue to believe that the American people have a love-hate relationship with inflation. They hate inflation but love everything that causes it.”

— William E. Simon

“It was the biggest inflation and the most sustained inflation that the United States had ever had.”

— Paul A. Volcker, Federal Reserve Chairman who crushed 10% annual consumer price inflation by raising interest rates to 20%.

“During the slow recovery after the Great Recession, inflation was very low, and it took us a while to get it back moving up.”

— Charles L. Evans, former CEO of the Federal Reserve Bank of Chicago

“Like so much else in Washington, inflation has become a political football. That’s unnecessary.”

— Jake Auchincloss, politician

“Inflation is going to happen no matter what. If you increase the money supply, you get inflation. There’s not some magical cure for getting rid of inflation except to increase the productivity, the output of goods and services.”

— Elon Musk

Prices seem to go up daily. It’s harder and harder to keep spending in line with income. We keep maxing out our credit cards. Scary times. Why is this happening? Why can’t somebody do something about it? What is the real story behind the inflation we are experiencing? The real story isn’t what they are telling us.

Inflation is a hot topic these days, probably because it greatly affects all but the wealthy and most affluent. We feel it directly and immediately in the form of increased prices of our everyday goods. This is price inflation.

Statista has a wonderful chart (below) of people’s concerns, based on a January 2023 survey of 20,570 people worldwide, ages 16-74. It shows that inflation was cited as the top concern by 40% of respondents.

Source: https://www.statista.com/statistics/946266/most-worrying-topics-worldwide/
Source: https://www.statista.com/statistics/946266/most-worrying-topics-worldwide/

Here is the article that prompted this post on “Greedflation”

Arsenio Toledo on June 01, 2023 wrote this stunner in Natural News: “GREEDFLATION: McDonald’s, PepsiCo raising prices beyond inflation to generate bigger profits

 “Food giants McDonald’s and PepsiCo continue to greedily raise prices, forcing many consumers looking for price breaks to keep waiting for the day when food prices normalize.”

“These price increases are ongoing. Many companies do not plan to change course and will continue increasing prices or keeping them at elevated levels even as some executives are warning that shoppers may become reluctant to spend at outlets that do not stabilize their prices. (Related: Inflation remains a problem for middle- and lower-income Americans as Biden’s Federal Reserve keeps raising interest rates.)”

“PepsiCo, the New York-based food giant that owns everything from Cheetos and Mountain Dew to Lays and, of course, Pepsi, reported a revenue increase of more than 10 percent to $17.85 billion for the fiscal quarter that ended on March 25. The company now expects organic revenue growth to grow by eight percent for the year, compared with its previous forecast of six percent.”

“’Companies are not just maintaining margins, not just passing on cost increases, they have used it as a cover to expand margins,’ warned Albert Edwards, a global strategist at French multinational bank and financial services company Societe Generale. ‘Inflation is going to stay much higher than it needs to be, because companies are being greedy.’”

To the extent that folks other than Arsenio Toledo and Albert Edwards think this way – and I believe that many do, we are in some serious trouble. Price inflation is indeed a major problem, but “greedy companies” are not its cause.

Fundamentally, government is the cause.

Understanding inflation

The primary cause of inflation we are experiencing and feel today is devaluation of the currency – the US dollar. The dollar has lost roughly 96% of its purchasing power value since 1913 (when the Federal Reserve was created). This means that what goods and services you could buy in 1913 for $1 would now cost you about $25. You remember the good old days of 1913 of course.

Why did this happen? Well, the Federal Reserve Bank (Fed) – privately owned by large commercial banks – has been printing money by the boatload since 1913 when the Fed was created. The big growth, however, took place after WWII, and particularly since 1995 – from about $5 trillion to over $20 trillion.

Even though money supply needs to grow at roughly the same rate as the economy, 400% growth over less than 30 years is clearly excessive. Rather than waste time here on the intricacies and obscurities of money supply economics, it is better simply to recognize that all is not well with our money supply. Let’s focus instead on what we actually experience – price inflation.

Price inflation – prices go up for a reference basket of goods and services – causes us to pay $25 today for a basket of goods and services that in 1913 cost about $1. The chart below shows this horror story about as well as anything I’ve seen.

Source: https://www.visualcapitalist.com/purchasing-power-of-the-u-s-dollar-over-time/
Source: Visual Capitalist

This is real inflation as we normal folks understand it. Inflation may well be a consequence of excessive money printing, but that explanation doesn’t do much to help us. Us normal folk can’t do a whole lot about money printing, yes?

Well, what can we do?

First, let’s find somebody to blame: how about evil businesses?

We buy pretty much everything we consume and use from businesses. Businesses control price prices, or so we believe. This means that some, or perhaps most, businesses are somehow colluding to raise prices as much as they can, wherever they can, however they can. This is conveniently known as “price gouging”. From Wikipedia:

Price-gouging. Price gouging is the practice of increasing the prices of goods, services, or commodities to a level much higher than is considered reasonable or fair. Usually, this event occurs after a demand or supply shock. This commonly applies to price increases of basic necessities after natural disasters. The term can also be used to refer to profits obtained by practices inconsistent with a competitive free market, or to windfall profits. In some jurisdictions of the United States during civil emergencies, price gouging is a specific crime. Price gouging is considered by some to be exploitative and unethical and by others to be a simple result of supply and demand.”

“Price gouging is similar to profiteering but can be distinguished by being short-term and localized and by being restricted to essentials such as food, clothing, shelter, medicine, and equipment needed to preserve life and property. In jurisdictions where there is no such crime, the term may still be used to pressure firms to refrain from such behavior. The term is used directly in laws and regulations in the United States and Canada, but legislation exists internationally with similar regulatory purpose under existing competition laws.”

“The term is not in widespread use in mainstream economic theory, but it is sometimes used to refer to practices of a coercive monopoly that raises prices above the market rate that would otherwise prevail in a competitive environment. Alternatively, it may refer to suppliers’ benefiting to excess from a short-term change in the demand curve.”

“Laws against price gouging. In the United States, state laws against price gouging have been held as constitutional at the state level as a valid exercise of the police power to preserve order during an emergency, and may be combined with anti-hoarding measures.”

“As of March 2021, 42 states have emergency regulations or price-gouging statutes Price-gouging is often defined in terms of the three criteria listed below:

  1. Period of emergency: The majority of laws apply only to price shifts during a declared state of emergency or disaster.
  2. Necessary items: Most laws apply exclusively to items essential to survival, such as food, water, and housing.
  3. Price ceilings: Laws limit the maximum price that can be charged for given goods.

Some states that do not have a specific statute addressing price gouging, can nevertheless apply the law as an ‘unfair’ or ‘deceptive practice’ under a consumer protection act.”

Price gouging applies only in a state of emergency? Whoa! This means that we have been, effectively if not legally, in a state of emergency since at least 1913. Can businesses be so truly and endlessly evil as to price-gouge forever?

So, Is inflation really “greedflation”, as Arsenio Toledo claims above?

Umm …

Perhaps McDonald’s and PepsiCo have no competition for whatever it is they sell, or maybe they have arranged for competitors for collaborate. This seems to me to be a bit improbable, and more likely, impossible. Businesses such as these compete ferociously. Competition in the marketplace is what keeps the lid on prices, apart from the occasional and the odd anomalies.

Price competition uses product innovation, advertising, supply chain creativeness, and many other tools. Price gouging is almost entirely limited to rare situations in which only a single supplier is available, temporarily.

So why would someone want to blame inflation on business greed when it clearly isn’t, apart from rare circumstances?

Perhaps the answer is simply agenda vs. facts and understanding. From the Natural News quote above:

“’Companies are not just maintaining margins, not just passing on cost increases, they have used it as a cover to expand margins,’ warned Albert Edwards, a global strategist at French multinational bank and financial services company Societe Generale. ‘Inflation is going to stay much higher than it needs to be, because companies are being greedy.’”

French bank Societe Generale? Probably under huge pressure due to interest rate increases that are putting their loan portfolio seriously underwater. Like almost every bank in the world today. High interest rates due to bank efforts to control inflation. Hmm …

No greedflation but just business-as-usual

Banks, as I recall reading somewhere, are businesses. Bank shares are listed on stock markets even. Today, bank profits are headed south, as well as unrealized investment portfolio losses becoming involuntarily realized.

Blame anybody but us.

Business-as-usual activities under such enormous pressures can often be highly productive, assuming the business survives. When things are running smoothly and stockholders are happy, there is little pressure to innovate or to cut costs. Tough times clean out the weak and stodgy.  Evolution at work.

Mark Thompson and Julia Horowitz of CNN Business reported in March 2023 that banks in Europe face serious risks: “Europe’s banks are still at risk, regulator warns”:

“José Manuel Campa, the head of the European Banking Authority (EBA), told a German newspaper that European lenders remained vulnerable following the demise of SVB and the subsequent emergency rescue of Credit Suisse by UBS.”

“’The risks in the financial system remain very high,’ he told Handelsblatt. He added that rapidly rising interest rates were taking their toll. Such a dramatic change in interest rates not only increases the opportunities for banks to make money, but also the risks.”

“The EBA is keeping a close eye on the issue of unrealized losses on bank balance sheets. Such losses on US Treasuries held by SVB — one consequence of a historic campaign by central banks to fight inflation by hiking borrowing costs — contributed to its failure.”

Greedy businesses – even including bank businesses, maybe?

First Republic Bank collapsed May 1, 2023. Assets: $212 billion.
Too greedy, or not greedy enough?

Big-box retailers appear to be having a pretty rough time despite whatever greediness they have managed to pull off: “15 Big Box Retailers at Risk of Bankruptcy in 2023”:

“The list of endangered retailers continues to grow this year. Many companies that actually exited bankruptcy in the past are now being threatened by it again, while others that proved resiliency and stability for decades are struggling with debt, weak revenue, and higher competition and may have to shut doors for good in the next few months. Forbes analysts say that a bankruptcy wave was already expected.”

“Here is the list:

  • Abercrombie & Fitch
  • Barnes & Noble
  • AMC
  • Macy’s
  • American Eagle Outfitters
  • JCPenney
  • Forever 21
  • Kmart
  • Foot Locker
  • J. Jill
  • Casper Sleep
  • Alex and Ani
  • Brooks Brothers
  • Tailored Brands
  • Wayfair

Will any of these fall in the second half of the year? Some of them? All of them? We’ll see. “

Maybe these retailers just weren’t greedy enough?

Boston-based Wayfair lost nearly $400 million in the quarter ending June 30, 2022.
Greed is simply not working well for retailers.
Boston-based Wayfair lost $400 million in the quarter ending June 30, 2022.
Greed is simply not working well for retailers.

If not due to greedy businesses, what can be done about inflation?

It seems pretty clear, to me at least, that greedy businesses are not causing inflation by greedy price increases. Where some degree of competition exists, businesses have to struggle mightily to cover rising production costs and to maintain profit margins sufficient to keep stockholders somewhat happy. Only if there is no competition – a single supplier for a wide variety of goods and services – can predatory pricing occur. New competitors will surely appear quickly to get markets back into competitive operation.

Note also that the past decade or so of low, zero, and even negative interest rates has created quite a number of asset price bubbles. Think housing and commercial real estate. Free or almost free money can justify even the shakiest and most overly-optimistic projects and purchases. The true bill eventually comes due, as it has very recently, when interest rates get back to normal or above.

Overinflated asset prices get whacked in such times as today. Selling or repurposing overpriced assets takes time and requires a willingness to eat sizable losses. Many of these will simply be shuttered and any remaining parts sold off. Happening today. Greed? Probably only bargain-buyer “greed”, taking advantage of a rare situation.

How did interest rates get so low anyhow? Well, as you already know, this is caused by the government – the Fed and its lackeys – helping things along. Interest rates are set by the Fed, with bank lending rates adjusting accordingly. Interest rates affect almost everything we buy to some degree, so rising interest rates do generate some inflation in prices of goods and services. In our hugely debt-based economy.

Worse yet, if that’s possible, low interest rates encourage borrowing to fund both good and not-so-good projects. Funding occurs by the Fed printing more money since it doesn’t have a big stack of cash lying around in general. Money printing happens through bank reserves increases, which allows banks to lend more. Businesses and consumers borrow more, resulting quite often in an overheated economy. This creates the demand-driven price inflation that we experience.

At some point, such as in COVID days, inflation from a variety of sources gets uncomfortably high, and the Fed in its infinite wisdom is forced to cool things off. It does so by increasing interest rates. It could also decrease the money supply, but not when Federal borrowings are unavoidably increasing – enormously and endlessly.

Interest rate increases, such as we have had recently, do impact the economy, but not always in helpful ways. The Fed in fact has an abysmal record of fighting inflation effectively. What happens is a recession or worse, bank failures or worse, and all manner of business failures or worse. The Fed is typically in charge of the “or worse” part.

“I cannot morally blame all Americans for allowing, for instance, the birth of the Federal Reserve System and the money destruction that has followed. They are simply ignorant about it and don’t know what happened or what is happening. They think that prices go up rather than that dollars go down.” — Robert Prechter

But wait – the Fed isn’t government, but a private business

Just when it appears that government, not businesses, are causing much of our price inflation, we find that the Fed is in reality, whatever that may be, a privately owned bank business. Possibly even a greedy business?

This is extremely inconvenient, yes? Let’s ask an expert about this: how about Milton Friedman, an American economist and statistician who received the 1976 Nobel Memorial Prize in Economic Sciences. That’s about as expert as you can get:

“The stock market crashed in October 1929. But that was not the cause of what caused the Great Depression. It was, in my opinion, a very minor element of it. What happened was that from 1929 to 1933 you had a major contraction which, in my opinion, was caused primarily by the failure of the Federal Reserve System, to follow the course of action for which it was set up. It was set up to prevent exactly what happened from 1929 to 1933. But instead of preventing it, they facilitated it.” — Milton Friedman

“No major institution in the US has so poor a record of performance over so long a period as the Federal Reserve, yet so high a public reputation.” — Milton Friedman

“The Federal Reserve the privately owned U.S. central bank definitely caused The Great Depression by contracting the amount of currency in circulation by one third from 1929 to 1933.” — Milton Friedman

Well, this isn’t good news. The Fed is a private bank owned by a number of very large banks. It works for government, but is controlled by big banks. Or, perhaps it is the other way around in practice: the Fed controls the government. This is at least the opinion of another expert, Robert Reich, an American professor, author, lawyer, and political commentator who worked in the administrations of Presidents Gerald Ford and Jimmy Carter, and served as Secretary of Labor from 1993 to 1997 in the cabinet of President Bill Clinton:

“The dirty little secret is that both houses of Congress are irrelevant. … America’s domestic policy is now being run by Alan Greenspan and the Federal Reserve, and America’s foreign policy is now being run by the International Monetary Fund [IMF]. …when the president decides to go to war, he no longer needs a declaration of war from Congress.” — Robert Reich

Great. The Fed that is supposed to manage inflation (and to minimize unemployment as a side-hustle) is actually part of whoever controls the world. Via huge banking concerns. Doesn’t this just give you a warm-fuzzy feeling? Me neither.

The Federal Reserve Bank, Washington DC, sure looks like it is doing well.
Of course we’re paying for it.
The Federal Reserve Bank, Washington DC, sure looks like it is doing well.
Of course we’re paying for it.

Inflation and interest rates are controlled by major banks?

If this is the case, our hopes on getting price inflation under control – i.e., greatly reduced – seem rather dim at the very least. Only if reduced price inflation was good for the big banks might the Fed actually be working on our side. Assuming of course that the Fed is not largely or completely incompetent, or worse.

So, what might be on the to-do list of our major banks?

Banks are busy right now trying: to introduce Central Bank Digital Currencies (CBDCs); to cover enormous unrealized losses in their investment portfolios; and to consolidate the fragmented banking system by gobbling up – greedily, no doubt – as many smaller banks as possible. Might any of this frenzied activity be of help to us in reducing price inflation?

Oh, I forgot here a major banking agenda item: facilitating world domination by the WEF and accomplices (such as most governments globally). Busy folks.

Reduced inflation would help make interest rates decrease, since increased interest rates are the only tool in the Fed’s toolbox that isn’t (yet) broken. Decreased interest rates would in turn reduce unrealized investment portfolio losses. This has to be a huge deal to quite a large number of lesser banks that are presently looking at a deep chasm dead ahead. But maybe not such a big deal to the biggest banks, since extensive lesser-bank failures would reduce competition and permit bank businesses to behave somewhat more greedily thereafter.

This whole system has so many moving parts that it is virtually impossible to figure out where things are headed. That said, it seems worth making a few wild guesses that are certain to be every bit as reliable as those of the various experts out and about these days:

  • World domination, or something close, will be a near-term reality
  • Inflation will be brought under control by economic collapses
  • Nations will disintegrate internally as people resist, revolt, and refuse
  • Nothing will go as planned by the world dominators
  • AI will not take over the world but will just be a tool of the powerful
  • Pandemics will continue as a tool of the powerful
  • Situations inside most countries will get very messy or even messier

Not terribly good news, but take hope. If I am as accurate as most others out there, very little of this will actually occur. What happens will be a surprise since it is really up to chance and chaos.

Bottom line:

Price inflation is certainly real and having substantial impacts on most of us normal folk. Blame is being placed everywhere – such as on greedy businesses – except on where it actually belongs: government, with all its tentacles. Zero or less interest rates fuel asset bubbles, which inconveniently and inevitably burst when government increases rates. Shortages, supply chain disruptions, wars, and general turmoil cause producer costs to rise greatly, squeezing profit margins and even threatening collapse for many enterprises. Price increases are done to survive, which we see as broad-based price inflation.

Meanwhile, the ever-helpful government throws its (our) money about as if it were free. Which it is, for them. Thus, “greedflation” does not exist. It is only yet another distraction from what’s really going on: government mismanagement of almost everything. As usual.

Related Reading

It gets much worse: What is the real rate of consumer price inflation?
While it is quite clear that prices for almost everything are going up, and have been going up for at least several years, there is a wide range of opinion on the real consumer price index (CPI) inflation rate. The official government CPI-U inflation rate today is just above 6% on an annual, year-over-year basis. The “-U” suffix stands for urban population prices, as published each month by the U.S. Bureau of Labor Statistics (BLS). A recent BLS chart with major categories is shown below.”

“On the surface, 6% a year seems high but tolerable. A basket of goods that cost us $100 in December 2021, costs $106 in December 2022. If this rate of increase, aka price inflation, continued at this rate for 10 years, we would be paying $179 in December 2031 for that same basket of goods. Not bad if our income growth at least roughly matches this price growth rate (see here for more detail).”

Price inflation looks pretty real and serious if you buy things like food.
 Sorry for yet another chart: This one from CNBC shows annual price increases for many categories of consumer goods. The bottom line here shows that the official 6.3% price inflation excludes minor purchases such as food and energy. Who buys much of that stuff anyway?”

“The raw data that BLS uses is probably real. Especially since the chart shows huge price increases in categories where normal folks spend most of their money. The exclusion of ‘food and energy’ from the CPI statistics is based on these components being highly variable, and thus are considered by the BLS as misleading ‘noise’ for their purposes.”

Extract from CNBC chart based on BLS figures for October 2022.
Extract from CNBC chart based on BLS figures for October 2022.

“The BLS figures clearly aren’t ‘lies’, or even ‘damned lies’. They are ‘statistics’ developed for government purposes, which are neither hidden nor unreasonable – in context. But the BLS figures are, for the purposes of us normal folks, almost meaningless. Try building your spending budget for the coming year on BLS official price inflation statistics (e.g., 6.3%), and then on category detail statistics. Which one would you regard as ‘real’?”