Do supply chain issues cause inflation?


There seems to be a “consensus” among “very smart people” that the inflation we see is caused by everything from supply chain bottlenecks to government giving people too much money unearned, causing them to quit their service jobs and buy too much stuff. Larry Summers (who has been predicting sustained inflation for a long time now) struts through editorial pages like Rooster ready to tackle new found chickens. Steve Ratner, still the voice of moderation (at least in his mind) says we need to stop helping people eat because it’s cutting into his net worth, which can’t last. The rich have to be in control…because since they’re rich, they have to be smarter.

Although we currently have a high level of inflation, let me present to you perhaps another reason why you will not be here among these two people that I mentioned, and also to show that you can be right on your prediction even if your reasoning is wrong. Hey, you.

The current reasoning for a high inflation of VSP (very intelligent people) revolves around 2 axes. Either it is related to a pandemic where supply chain disruptions caused by covid have made workers sick or simply not wanting to work on the front line, exposing themselves to illness in low paying jobs. I think it had merit in the beginning, but those reasons are fading, and some in this camp still say that inflation has already peaked, but it’s constant.

The second camp thinks that people simply have too much money (Ratner and Summers) and that the government should no longer help working families. Not a penny. Summers thinks QE should end yesterday, and I tend to agree with that. If there’s anyone who should be denied extra income, it’s the mega rich who have increased their wealth well beyond a TRILLION (with a T) during the pandemic. The problem is that this argument about too much money in circulation seems to be little more than the tired old excuse the rich make for depriving the poor and working poor of a better life.

Let me introduce a third reason…the epic consolidation of the industry. I’m sure when you go to the grocery store you don’t see labels that say Conagra, Cargill, WH Group, or that Walmart and Kroger control 75% of the entire grocery market. But I go to Albertsons or Ralphs… guess what, owned by Kroger. It’s literally impossible to own a Mom and Pop grocery store, or even a regional grocery chain. You cannot compete. You may not know that brands pay for their place on store shelves, so the ones with the most money are the ones you see first. You may not know that farmers get less and less (15% of what you spend on the things they grow comes back to them), and they are forced to plant seeds provided by Monsanto (Bayer). If you don’t use their seeds but their seeds pollinate yours, you have to throw them away or pay. It all goes way beyond food. It’s in everything from the internet to video content with vertically stacked companies like Comcast Universal, Disney/ABC, AT&T/Warner (CNN), or airlines that through sweeping mergers and acquisitions have reduced the number of major airlines from 12 to 4. , and two more Spirit and Frontier just announced another. There are a lot of very wealthy people associated with an increasingly consolidated and powerful financial industry who are making a lot of money from these mergers, so it doesn’t really hold up much when you see these people writing editorials with their hair on the fire when they have an obvious conflict of interest (Ratner)

You only have to look at the earnings of almost all of these companies to know what is going on. For all kinds of free markets, it’s god, if you own a company that makes product “A” and your costs go up from anything to raw materials to employees demanding better wages, you’ll raise prices. ..UNLESS and that’s a very important word here…unless there are several other companies that also do “A” and they have found a way to have happy employees and they may have hedged their commodity prices so as not to raise prices. What happens? The first company will not increase its price. They are afraid of COMPETITION. They will reduce their profits to be competitive.

Several companies have raised prices blaming supply chain issues which are a minor annoyance that they could easily eat up, but have no competition, so they are raising prices even more than their costs are raising. .because they can. They don’t worry about the competition undermining them or anyone innovating because there is no one of stature who can threaten their market share. If a company raises its prices and also posts record profits, there is a problem that does not fit into the supply chain or the excess capital that causes inflation. Supply chain bottlenecks may have initially been the thing that got the ball rolling (and the catalyst that started pushing prices up), but now it’s nothing less than a excuse.

The thing is, we really don’t need more laws to fight this. We need to enforce existing antitrust laws and give responsible agencies the funding they need to do their jobs. They’ve been decimated over the last few administrations although sped up by Trump, Obama hasn’t really done much to help on that front as he has appointed many people who go through the revolving door between regulator and regulated. Senator Warren has been aware of this and recognizes the problem. The problem is that most people have no idea the true consolidation of most industries, and we’re starting to pay the price with higher costs, dangerous products, and companies so big they can make pressure to circumvent any type of regulation or competition. It’s time to start seeing the problem for what it really is and demand that our representatives in Congress take action by defunding the cops on the spot.

If you want a look at how the products on grocery store shelves are coming from fewer and fewer companies, this is HERE

This is from July 2021 and it has only gotten worse.

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