The inflation lie

21 Jun, 2022 at 14:02 | Posted in Economics | 4 Comments

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  1. I would say Reich is correct to argue that oligopoly power is in part responsible for inflation.
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    I would also argue that the reason inflation has been subdued for decades is because of globalization. Labour markets in the West have been undermined and goods markets flooded with cheap goods from the East.
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    Now that globalization is on the wane and new tariffs have increased the cost of goods from cheap labour countries, inflation has found additional impetus.

  2. KL, I agree that this is a most unsatisfactory explanation of the causes of inflation. (Although he right to point out possible monopolistic abuse.) Although I would argue geopolitical (factors (eg the (re) entry of China and the former Communist bloc into the international capitalist system and uncertainty over the future roles) – among some other very important factors – are probably going to be important in understanding both the deflationary and inflationary trends in assets and good markets since the 1980s, global micro economic market structures are almost certainly going to be an important part of the jigsaw. Ob top of this of course we have had very large QEs.

    • Something also very anecdotal, a lot of places are finding it hard to hire staff (in Britain this is put down to Brexit – which I am sure has had an impact – but I am in France at the moment and they are having the same problem. Partly, fallout from the effects of the Pandemic. Most likely, however, the Pandemic shock has exacerbated underlying problems.

  3. In his last post Prof. Syll wrote “I think we are better served by economists who more than anything else try to contribute to solving real problems”.
    So why post a video by Robert Reich? Reich an appallingly bad example. He is nothing but a shill for the Democrat party.
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    Reich has radically changed his story in recent months. He is now claiming inflation is not the fault of the Biden government because it is largely due to corporate greed and the increasing power of oligopolies to raise prices!
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    Reich presents a chart of P&G profits to supposedly illustrate price gouging. But the chart actually shows that recent P&G profit margins are lower than in 2020. Profits had fallen and since largely recovered, but they are still not back up to where they had been previously. Corporate greed?
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    Reich’s argument fails to explain why despite rising concentration in many sectors of the economy there was low inflation 1982 – 2020.
    And he fails to explain why inflation exploded after 2020. Did the corporations suddenly become “greedy” in the past two years? Weren’t they greedy over the previous three decades?
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    Only 11 months ago Reich was telling us “Don’t Buy Into the Inflation Scare…We are hearing about inflation again because the government is spending a lot of money and interest rates are low”.


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