Political greed, not corporations, to blame for rising prices – Pasadena Star News

The numbers I just came inand it looks like the historic rise in inflation will finally subside from 2022. Consumer prices rose less than 3% last year.

However, this does not change the fact that a latte can be up to $9 nowadayswhich makes sense considering that the price of coffee beans has increased 40% since before the pandemic.

As tempting as it is for inflation-stricken consumers to ignore the exploding prices we see on Corporate greedwe should be careful not to direct our anger at the real culprits: power-hungry politicians. It is true that average profit margins for U.S. companies have increased, but that is normal in a high-demand economy. A closer look at the underlying forces of the inflation shock we have experienced over the past four years shows that the real culprit is political greed. More specifically, it is the billions of dollars politicians have spent in an effort to win votes.

Inflation in the US rose rapidly in 2021. While cheap money and low interest rates certainly played a role, these had been around for many years without driving inflation. The real catalyst was politicians showering consumers and businesses with cash during a supply chain crisis caused by lockdowns. In short, we had too much demand chasing too little supply.

In 2020, the first year of the pandemic, Trump’s administration distributed 300 billion US dollars in the form of direct payments to households. Since consumers were mostly at home, they spent much less and were able to bank much of their stimulus aid. This led to billions of dollars in pent-up demand that was released when the lockdowns ended. Trump also showered money on businesses, handing out more than $350 Billions in loans for small businesses and 500 billion US dollars in corporate loans. In many cases, this money went to companies that did not really need it. Overall, the deficit in Trump’s last year was 3.4 trillion US dollars – that was almost 15% of GDP.

What did we expect when vaccines finally arrived in 2021 and consumers were allowed to leave their homes, with more cash than ever before and factories and supply chains in complete disarray? Just as the textbooks told us it would, inflation skyrocketed.

Political greed continued during the Biden years. The president signed huge spending bills. In March 2021, it was the American Rescue Plan that injected a new $1.9 trillion into the economy. This was followed in November 2021 by the Infrastructure Bill with $1.2 trillion.

Together, these two measures provided an economic stimulus of 12% of GDP in an economy with 5% unemployment. No wonder inflation soared in 2022 and continued into 2023.

In the meantime, companies have struggled to do their job of increasing supply to meet demand and balance the market. Higher prices play a key role in this, as they serve as signals and incentives for companies to invest and hire.

Are companies greedy? Well, yes and no. As the builder and leader of a global company, my job is to increase profits over the long term. I know I have to serve my customers excellently and innovate to keep them. If I chase short-term profits by raising prices too much, I risk losing customers. Are there companies that do this anyway, raising prices too much during inflation to make short-term profits? Sure, but market forces should put an end to them. Over time, people will just buy their lattes elsewhere. Competition keeps prices in check.

What we really need to worry about is maintaining competitive markets. If competition in markets is becoming less and less, we should be concerned about high prices. If you have a monopoly, you can charge whatever price you want without any consequences. That's what antitrust law is for.