Worst Blog Topic Ever?

What causes inflation? Why does the cost of a good or service increase? Although it has been an eternity since my economics class at the University of Richmond, I still remember the text book definition—“too much money chasing too few goods” In other words, when the demand for something combines with the scarcity of that same something, the price rises. When you think about this for a minute it makes perfect sense. Back in the 1970’s when OPEC had a strangle hold on the supply of oil, they could send the price of gas through the roof by simple turning off the taps, giving the OPEC states outsized power. In perhaps a less complicated version, if there is an explosion over at the Twinkee factory, Twinkee addicts buy up all the remaining Twinkees on the shelves sending their price skyward, since they have suddenly become scarce.

I know what you are all thinking…this might be the worst blog post topic in the history of The Tempest. You all may be right on that point but nevertheless I’ve been thinking about this whole inflation thing a lot lately. In a general sense, I understand how inflation can happen, it being a mechanical rather than a mercurial phenomenon. But lately, I’ve started to have my doubts.

In the aftermath of COVID with all of the quarantines and shutdowns it instigated through western economies, a huge monkey wrench got thrown in the interconnected world wide supply chain. Combining the predictable scarcity of supplies with the unprecedented fiscal stimulus from Washington brought the mother of all examples of lots and lots of money chasing fewer and fewer goods. So far, totally textbook. But, supply chain issues have long ago been remedied. Walk through any grocery store and hardware enterprise in the United States and you will find shelves overflowing with everything from soup to nuts. All the stimulus checks have come and gone, removing the excess capital in the system. And yet, Publix is still trying to sell this for $11.99…

My wife was having none of it. As a savvy consumer she knows that Publix does this all the time, trying to gouge their customers by charging a ridiculous price for a popular item. But if enough people say, “I’m sorry, I’ll pass”, then as sure as night follows day, a few days later that same item is suddenly on sale. Yesterday, Pam’s patience was rewarded when this very same box of Keurig cups cost $7.99. If you’re keeping score at home that’s a 33% discount. So when Pam bought three boxes, she saved us 12 bucks.

This brings me to the point of this blog which is, at what point is inflation no longer caused by the laws of demand and scarcity but rather the laws of avarice and greed? I am famous for having no clue what anything costs and as such am a terrible consumer. My wife, on the other hand, knows the price of nearly everything, and although she knows that Publix isn’t the cheapest grocery store in the world it is convenient, clean and well organized etc. But I can’t tell you how many times she has come in the house and said something like, I’m sorry, I’m just not going to pay X dollars for X product. Piss her off enough and she will ditch her brand loyalty quicker than a fat kid on a box of donuts. If enough of us do the same thing, watch some of these prices start to drop. If “Big Grocery” thinks they can get away with making a quick buck by gouging their customers—they won’t hesitate to do so. But what happens if all of us say, “Shame on you. You can stuff that box of K-Cups where the sun don’t shine.”

Look people, I want everyone to prosper. I don’t begrudge anyone making a buck. If prices are up because of scarcity and high demand, that’s one thing. But if scarcity isn’t an issue and demand hasn’t increased, then I am left with the conclusion that a lot (although certainly not all) of price inflation is now a result of old fashioned opportunistic greed. To the extent that we have tools at our disposal to fight back, we need to do so. If that means going with store brands, or buying in bulk at big lots stores, or even ditching your favorite store for that messy cheaper place with the weird parking lot…if enough of us fight back, prices will come down.