There are few good things about living through a period with the highest inflation in four decades, but here’s one: It’s a chance to reexamine what happens in an economy that’s gone haywire.
Since prices started to escalate a year ago, politicians and economists have seized on inflation to tell their preferred story about what went wrong and what policies would bring it back into line. Some say it’s very straightforward: Supply and demand, Economics 101.
“There’s simply a lot of cash out there,” said Joe Brusuelas, chief economist for the accounting firm RSM US, referring to the several trillion dollars in pandemic stimulus that has filtered into the economy since early 2020. “The competition for those goods is up, and that’s sending prices up, whether we’re talking about getting a Nissan Sentra or a seat on an American Airlines flight.”
The White House and progressive organizations, however, say wait a minute: This time is different. In a time of extraordinary disruption, they contend, increasingly dominant corporations are taking the opportunity to jack up prices more than they otherwise could, which is squeezing consumers and supercharging inflation. Or “greedflation,” as the hypothesis has come to be known.
The argument comports with the Biden administration’s focus on the ills of economic concentration. Congressional Democrats have run with the idea, introducing bills that would impose a temporary “excess profits tax” on companies that charge prices they deem unreasonably high, or simply ban those high prices altogether. Critics, including the nation’s largest business lobby, deride these efforts as based on a “conspiracy theory” and a “flimsy argument.”
Read more at: https://economictimes.indiatimes.com/small-biz/trade/exports/insights/is-greedflation-rewriting-economics-or-do-old-rules-still-apply/articleshow/91998360.cms