Mainstream news media and mainstream politicians have been misleading the public about what has caused the current inflation — and what to do about it. They — and the Federal Reserve (the bank-owned nationwide entity that decides how much money to circulate) — misdiagnose the causes, so their remedies actually hurt ordinary people.
I’m posting here some articles that provide true information, fresh insights, and suggestions for solving this economic problem in ways that help ordinary people.
This video — in less than 3 minutes — DEBUNKS 4 Myths About Inflation. Robert Reich explains economic realities in clear and brief ways. In less than 3 minutes he DEBUNKS 4 myths about inflation. He briefly says what IS causing inflation: excess corporate profits and monopoly power instead of competition. It’s no secret that inflation is a massive problem right now that is squeezing Americans’ already tight budgets. In June, inflation reached 9.1 percent in the U.S. — a 40-year high. But what’s actually causing inflation to run so rampant isn’t being accurately portrayed by the corporate media. The truth about inflation is getting covered up by countless falsehoods lobbed by powerful corporations and their lackeys in Congress. HERE IS THE VIDEO: Our latest video debunks a few of the common myths being told about inflation right now — and underscores the need for Congress to act.
‘CEOs, Not Working People, Are Causing Inflation’: Report Shows Soaring Executive Pay. “When you look at those numbers and at CEOs trying to blame workers for inflation, it just doesn’t add up,” said the secretary-treasurer of the AFL-CIO. https://www.commondreams.org/news/2022/07/19/ceos-not-working-people-are-causing-inflation-report-shows-soaring-executive-pay?utm_source=daily_newsletter&utm_medium=Email&utm_campaign=daily_newsletter
How greedy corporations fuel inflation: “Companies make any kind of excuse to raise prices on everything.” https://www.nationofchange.org/2022/06/28/how-greedy-corporations-fuel-inflation/
A Left Answer to Inflation: It is time to forsake the Chicago school of economics: https://inthesetimes.com/article/inflation-federal-reserve-policy-recession-class-war?link_id=2&can_id=1d662460c0abb8939c5044c82927552b&source=email-a-national-rail-strike-could-still-be-on-the-table-grading-bidens-economic-record-2&email_referrer=email_1677344&email_subject=a-left-answer-to-inflation-independent-unions-are-great-and-proof-of-labors-broken-institutions
Here is a link to a Washington Post article on the causes of current inflation. https://wapo.st/3NYGNuE It is overwhelmingly attributable to three elements: Food, shelter, and energy, with energy accounting for more than two-thirds. Of course, these three items account for almost 40% of customer expenditures, so it’s not that lopsided. This is important, because energy costs can reverse as quickly as they went up.
How the Left Should Think About Inflation: There is no compelling reason to raise interest rates, now or later. By James K. Galbraith for The Nation February 18, 2022 https://www.thenation.com/article/economy/inflation-federal-reserve/?utm_source=Sailthru
The Fed’s Crash Landing with L. Randall Wray: https://realprogressives.org/podcast_episode/episode-173-inflation-the-feds-crash-landing-with-l-randall-wray/
The ‘experts’ love to blame government spending for today’s inflation – especially the paltry stimulus checks disbursed during the pandemic. Wages are another favorite culprit. Listeners to this podcast know these are not the causes. (How long ago were those damn checks?) However, both the pandemic and the current war have brought us supply chain disruptions. We can also look to corporate manipulation of prices and markups:
“And they’re very open about this. When they have their meetings with shareholders and others, they say, look, our customers are not going to blame us if we hike up the markups and take more profits, because they realize that inflation is creeping up. So, they’re not going to blame us. So, let’s do it. And they are.”
Randy defines stagflation and its causes. He compares today’s inflation to that of the 1970s along with the actions of the infamous Paul Volcker. He explains why the Fed’s “tools” for fighting inflation are no tools at all. He suggests a legitimate role for a central bank includes protecting the public from banking fraud. He replies to Steve’s question about eliminating the interest rate altogether:
“This was actually Keynes’s proposal to have a zero overnight interest rate. His proposal was to euthanize the entire rentier class. You all know what euthanize means. Mercy killing of the rentier. That is the class of people that live off collective interest. He saw them as functionless in the economy. They don’t serve any useful function. So, let’s euthanize them now. Keynes didn’t really mean kill.”
Steve talks of people’s desperation as they look for solutions to the real-life problems that are not on the Fed’s radar. Inflation could be addressed with targeted spending on behalf of the public using the fiscal power of Congress. Expecting the Federal Reserve to fix it with interest rate adjustments is like giving a child a fake steering wheel in the back seat and expecting them to drive the car.
- Randall Wray is a Professor of Economics at Bard College and Senior Scholar at the Levy Economics Institute. www.levyinstitute.org/scholars/l-randall-wray
This was published Feb. 14, 2022: Here are some truths on inflation that Republicans & corporations don’t want you to know: https://www.dailykos.com/stories/2022/2/12/2080079/-Here-are-some-truths-on-inflation-that-Republicans-corporations-don-t-want-you-to-know?detail=emaildkre2
On April 12, 2022, Robert Reich (a former Secretary of the Dept. of Labor) wrote this about inflation:
Memo to President Biden and the Democrats
From: Robert Reich
Re: Inflation and the economy
As America slouches toward the midterm elections, you need an economic message that celebrates your accomplishments to date – job creation and higher wages – yet also takes aim at the major abuses of economic power that are fueling inflation and widening inequality.
You should put these ten indisputable facts centerstage:
1. Corporate profits are at a 70-year high. Yet corporations are raising their prices.
2. They are not raising prices because of the increasing costs of supplies and components and of labor — which are real but expected when an economy goes suddenly from a pandemically-induced deep freeze to meeting the soaring demands of consumers who are emerging from the pandemic. Corporations enjoying record profits in a healthy competitive economy would absorb these costs.
3. Instead, they’re passing these costs on to consumers in the form of higher prices. In many cases they’re raising prices higher than those cost increases, using the cover of inflation to increase their profit margins even more.
4. They’re doing so because they face little or no competition. If markets were competitive, companies would keep their prices down to prevent competitors from grabbing away customers. As the White House National Economic Council put it in a December report: “Businesses that face meaningful competition can’t [maintain high profit margins and pass on higher costs to consumers], because they would lose business to a competitor that did not hike its margins.”
5. Since the 1980s, two-thirds of all American industries have become more concentrated. This concentration gives corporations the power to raise prices because it makes it easy for them to informally coordinate price increases with the handful of other companies in their same industry — without risking the possibility of losing customers, who have no other choice.
6. Corporations are using these near-record profits to boost share prices by buying back a record amount of their own shares of stock. (Buybacks reduce a company’s shares outstanding, pushing its profit-per-share figure higher.) Stock buybacks hit a new record last year. So far this year they’re on track to exceed that record. In the first two months of 2022, S&P 500 companies have disclosed authorizations to buy back $238 billion in stock — a record pace, according to Goldman Sachs, which expects $1 trillion of buybacks this year – an all-time high.
Chevron engaged in $1.4 billion in stock buybacks and spent $500 million more on shareholder dividends than it did in 2020. This year, the oil giants are planning to buy back at least $22 billion more.
7. Most American workers have barely had a wage increase in 40 years (adjusted for inflation). Although corporations have recently given out wage increases in response to the post-pandemic surge in demand, these wage increases have been almost completely eroded by price increases.
Corporations are handing out wage increases to attract or keep workers with one hand, and then eliminating those wage increases by raising prices with the other. When corporations are enjoying near-record profits, we would expect corporations to pay the higher wages out of their profits rather than to pass them on to consumers in higher prices. But they are not. The labor market is not “unhealthily” tight, as Fed Chair Jerome Powell asserts; corporations are unhealthily fat. Workers do not have too much power; corporations do.
8. As a result of all this, income and wealth are being redistributed upward from average working people (many of whom live from paycheck to paycheck) to CEOs and shareholders, including the wealthiest people in America. Billionaires have become $1.7 trillion richer during the pandemic. CEO pay (based largely on stock values) is now at a record 350 to 1 ratio relative to median pay.
9. Wealthy Americas are now paying a lower tax rate than the working class. Some are paying no taxes at all.
10. Big corporations have accumulated a substantial amount of political power, with which they’ve beaten back lower drug prices, prevented higher corporate taxes, and amassed unprecedented corporate welfare.
In short, although the American economy is rebounding nicely from recession, the growing imbalance of economic power is bad for most Americans and for the economy as a whole.
This must be addressed through (1) tougher antitrust enforcement, (2) a temporary windfall profits tax, (3) higher taxes on the wealthy and on corporations, (4) a ban on corporate buybacks, (5) stronger unions, and (6) campaign finance reform to get big money out of politics.
You have a critical opportunity to reframe the national conversation as it should be framed — around these worsening abuses of economic power by large corporations and the super-rich. Republicans have left themselves vulnerable because they have no response to this. They believe their “culture wars” will distract the public from what’s going on.
This is not and should not be a partisan issue. Average working Americans – many of whom voted for Trump in 2016 and 2020 – are being shafted.