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John Zelnicker's avatar

Matt Stoller wrote a piece on December 29, 2021 in which he estimates that up to 60% of the current inflation (6.8% for 2021) is caused by monopolies/oligopolies raising prices far beyond their increased costs. They have pricing power and they are using it to massively increase their margins. He uses an interesting methodology that makes sense to me, but I would have difficulty describing it as well as he does. For those interested you can find it here:

https://mattstoller.substack.com/p/corporate-profits-drive-60-of-inflation

To the extent that he is correct, neither fiscal nor monetary policy can address this problem. It's going to take re-regulation and a much more robust anti-trust effort by the government. Lina Kahn at the FTC and John(?) Kanter at the DOJ anti-trust division are starting to work on this. Even Congress (amazingly) is getting in on the act by proposing re-regulation of the shipping industry.

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Herb Wiseman's avatar

I have noted some news items about the impact of climate-induced weather events on the Canadian supply of oil, shipping, trucking, chickens, cattle, vegetables and fruit. I have not followed closely the futures markets for these products but if their availability is being affected negatively, that will cause shortages and likely boost prices without any nominal increase in demand because sellers are able to command higher prices from the more prosperous or middle-class consumers just as the market speculators will bid up their prices.

As you say, inflation is a complex systemic problem with many feedback loops. I also believe that the COVID pandemic has introduced some other costs to retailers for masks, and sanitizing activities that are likely minor factors. In my country, nursing staff are working double shifts meaning overtime rates because of absent colleagues. The price of fossil fuels is affected dramatically by several factors and whereas last summer I was paying less than $1.15 per litre, now I am paying $1.34-6 per litre and as high as $1.46 per litre in Toronto last week.

The notion mentioned in the post by Wally Grigo about too much money chasing too few goods holds water ONLY if the savings rate is starting to decline. Do we have such data? The data that I have seen is that in my country the savings rate has soared to over 30% from around 3%. His idea to have prices take it away would be revealed if savings rates decline. Well-to-do folks complain about inflation NOT because of prices of goods but because of lower returns on investments such as loans and mortgages. As one of those, I notice it at the gas pump but take little notice in the grocery store.

My memory may not be allowing for accurate numbers but the concepts remain valid.

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