Inflated inflation

A short lesson on inflation (or something like it)..

Someone really close to me just had a phone call from his landlord: the message, a 9.25% increase in rent. The cause, or stated grounds for the increase — not that landlords are obligated to disclose grounds — was of course the rising cost of doing business; that is, inflation itself.

The Federal Reserve noted on 11 July that the annual inflation rate was 3%, with another dip of -0.1% between May and June. The Fed also noted that prices were nevertheless 20.8% higher since Donald Trump's "pandemic-induced recession."

So there, the landlord was on solid ground, although, to repeat, and again to be fair, the lessee — that someone really close to me — was owed no explanation from the lessor. In any case, my close friend the renter well understood the landlord's case: costs went up, so the rent goes up. Just a matter-of-fact, hard-dollars-and-cents business affair.

However, the landlord then added — a trifle unwisely, I would add — that some scouting around had been performed and the finding was that all the other landlords here and about had raised the rate of their rentals. That, continued the landlord in so many words, justified the 9.25% increase.

Suddenly, I am informed, my friend's sympathetic understanding of his higher rent because of actual inflationary pressures took something of a hit. That's the macro point of this post — the twofold punch in the economy's gut that President Biden tried to make an issue of.

Real inflation there indeed was. But some or much of the upward corkscrewing of prices in the darkest of inflationary times, explained the president, came from businesses increasing their net take even when such action could not be justified by real inflationary pressures.

Which is to say, these businesses were upping their prices merely because everyone else seemed to be doing so. Thus unreal inflation put additional, unnecessary pressure on consumers, which, naturally, resulted in more, real inflation.

The price-upping game was, and remains, just peachy for the haves, but pretty rotten on the microeconomic level for the have-nots, such as my largely fixed-income friend.

Yet I shall tell him forthwith that immensely distressed he should not be; nay, he should rejoice, for he lives in a mostly capitalist nation of mostly free markets — the very kind of Freedom! that our enemies hate.

Comments

[Anne J]

I think that's what is known as greed-flation.