Paul KrugmanWe're coming up on the 2nd anniversary of Biden's inauguration, and I have a few (not very original) thoughts about his economic policy 1/
The opening salvo was the American Rescue Plan, which came in for immense criticism as "the most irresponsible fiscal policy in 50 years". Soaring inflation seemed to vindicate the critics 2/
But now inflation seems to be coming down as fast as it went up. The new Team Transitory warns that this improvement won't last — but it's getting harder to make that case 3/
Here's "supercore" inflation — ex food, energy, shelter (which we know is very lagged) and used cars 4/
And here's average hourly earnings, skipping the period when pandemic compositional effects caused huge distortions 5/
Meanwhile, we seem to have avoided the "scarring" many feared, with the labor market recovering to pre-crisis levels far faster than it did after the financial crisis 6/
Maybe new data will make the picture look worse in a few months. But right now it looks as if we achieved rapid recovery at the cost of maybe 20 months of elevated inflation. 7/
TC Won't Give In To Lies@pkrugman
And would inflation truly have been so elevated if key markets weren't so consolidated, allowing "inflation" to provide cover for price gouging?
I don't think so.
DanFell@TCatInReality @pkrugman we don’t have an inflation problem as much as we have an excess corporate profit problem.
My Florida Native Garden@DanFell @TCatInReality @pkrugman
To be fair, I think we have both, with corporate profits riding on the (natural) inflation wave created by so many people having money to spend (thanks to the American Rescue plan, which helped so many millions of Americans) and not much to buy due to all the problems that we know: closure of production lines due to pandemic, supply chain disruptions, etc. It’s a classical high demand-low supply problem.
To be fair, I think we have both, with corporate profits riding on the (natural) inflation wave created by so many people having money to spend (thanks to the American Rescue plan, which helped so many millions of Americans) and not much to buy due to all the problems that we know: closure of production lines due to pandemic, supply chain disruptions, etc. It’s a classical high demand-low supply problem.
@DanFell @TCatInReality @pkrugman
I think prices of goods were marked with no faith in a quick recovery. I am from Venezuela originally, where currency was (still is) very volatile. Inflation 🔼 by merchants marking their prices taking into account that the currency would be devalued by the time they got their product sold, so on top of the regular margin of profit, an extra layer of future devaluation was added. I think something similar happened here.
I think prices of goods were marked with no faith in a quick recovery. I am from Venezuela originally, where currency was (still is) very volatile. Inflation 🔼 by merchants marking their prices taking into account that the currency would be devalued by the time they got their product sold, so on top of the regular margin of profit, an extra layer of future devaluation was added. I think something similar happened here.
@nathaliaassaad @DanFell @pkrugman
America has no history of devaluation. Why would that be a factor in the US economy?
While there were some supply line problems, they were generally brief.
A few areas (eg used cars) clearly were supply/demand mismatches. But food and energy had the sharpest inflation and their supply is more easily expandable.
With 2 years of corp earnings bragging about profit margins, it's pretty clear to me price gouging is the main driver
#InflationisPriceGouging.
@TCatInReality @DanFell @pkrugman
I am not saying that devaluation is the factor forcthe over-pricing. I was just giving that example of over-pricing for a diff reason than pure greed alone. I said that price gouging is embedded in other real factors, but it is not reasonable or healthy to think it’s the only reason.
I am not saying that devaluation is the factor forcthe over-pricing. I was just giving that example of over-pricing for a diff reason than pure greed alone. I said that price gouging is embedded in other real factors, but it is not reasonable or healthy to think it’s the only reason.
@nathaliaassaad @DanFell @pkrugman
Thanks for clarifying.
I don't think price gouging is the only reason, but that along with overall anticompetitive behavior are the majority of the reason in most cases.