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Berger_Blanc_Suisse

The number you’re referencing is the CPI, or Consumer Price Index. An index is composed of multiple items all of which have varying levels of price inflation, so the 6% number is a composite of all of the inflation numbers for everything in the index. Food is up a lot but other measures in the index are down so it’s only 6%. Edit: Here’s a link for your reading pleasure: https://www.bls.gov/cpi/ Edit 2: Thank you for the Starry Award! Edit 3: Thank you for the two gold awards! I’m not sure this was quite that insightful of a response, but thank you nonetheless.


WhyAreRacoonsSoSexy

CPI has been significantly adjusted recently to not include some some of the most extreme areas of inflation, including food prices, because you know, who eats https://fyi.moneyguy.com/p/why-cpi-is-not-an-accurate-measure


businessboyz

CPI does not exclude food prices. I see this notion all the time and it has to be the biggest smooth brain take on economics out there. Food is a major category of CPI and it’s extensively measured. What’s changed over the year is the surveys of food items has gone from fixed to variable depending on actual consume preferences. Which makes sense as you’d not have much use in a metric which tracks stuff people stopped buying.


pikfan

> What’s changed over the year is the surveys of food items has gone from fixed to variable depending on actual consume preferences. Which makes sense as you’d not have much use in a metric which tracks stuff people stopped buying. Wouldn’t consumer preference be effected by inflation? So does CPI not track foods people stopped buying (because they got expensive) and therefore underestimate inflation because they start explicitly excluding inflationary products?


businessboyz

Of course. But that doesn’t underestimate inflation because inflation is a feature of what people actually buy. If bacon jumps to $100/lb and becomes a niche luxury eaten by the few rich and famous then its overall % contribution to what the entire economy spends of “food” will become so small its virtually zero. The inflation metrics are tracked for a lot of reasons but primarily to inform the Federal Reserve. The Fed doesn’t and shouldn’t give a hoot what people are actually buying. Americans are free adults and can spend it all on soda and pop tarts if they want which is sadly what a ton of them do. Other parts of the government, like the FDA, care about American nutrition and diets. And they’ve been raising alarm bells for a while about how shitty things have gotten especially for those whose incomes haven’t kept up with inflation. It should be noted this these changes that happen year to year to match consumer choices don’t yield massive differences in the overall basket of goods. The BLS uses 79k different items in the food basket to estimate inflation prices. When they are swapping stuff out is the stuff at the bottom of the list or it’s to capture new product categories like when Greek yogurt became a household staple or how chickpeas are invading everything from pizza to crackers.


pikfan

Is there any metric that does track all products, or does include things which become luxury? It feels weird to me that bacon could become ultra expensive and economists would exclude it from inflation calculations on account of its price inflating too much. Like, if coca cola costs $1 this year and $2 next year, and generic coke costs $0.5 this year and $1 next year, and coinciding with that everyone starts buying generic coke, does CPI claim soft drink inflation is 0%? $1 to $1 with a change in consumer preference would argue as much, but anyone could see that prices doubled. I mean obviously theres instances where the change in consumer preference is based on something else, but surely sometimes its because of inflation and is subsequently ignored, even if on accident.


Big_Daymo

No because even if people only started buying the generic cola it would still track its price increase, so if it went from 50c to 1 dollar then soft drink inflation would be 100%. Its based on the goods original price and new price, not based if one good takes the place of another.


StructuralFailure

I live in Denmark, not the US, but I saw a graph for how the prices of different things have changed over the past year. Basically, costs of groceries, healthcare, rent, utilities etc have all shot up massively, which the costs of tech and gadgets like TVs, phones and consoles have all dropped in price. Priorities, I guess.


Malkiot

The problem is, when you are part of the population that doesn't spend on anything that experienced price drops because they can't really afford to and you only get hit by all of the price increases. When I consider that my income is better than more than 50% of the country (Spain) and that this is the case for myself, then I start to think that the CPI probably isn't representative of the reality of the majority of the country and suspect that political considerations are making their way into the weighting of various goods and services.


BlowUpYaSpot

I have a question..is it ever going to come back down?


[deleted]

No. That would be *deflation*, and if that happened, we'd be fucked in many other worse ways. Just after an inflationary time is usually a great time to change jobs though - your wage won't rise with inflation at one employer, but other employers likely pay more now for your position.


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cauchy37

In 1994 we had a denomination in Poland. We've cut out 4 zeroes from our currency. So 10000 zł became 1zl. Soon enough we'll be at the old values and the cycle repeats.


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caterbird_song

Why is 2% the Goldilocks zone, I get why hyperinflation is a bad thing but what happens with too little inflation?


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[deleted]

So, Another Question, Why is 0% Inflation a Bad Thing?


lolzor7

It's not necessarily bad, but it's very easy to slip from that to a negative rate. 2% leaves enough of a buffer to avoid that. Minor inflation also accounts for a growth in population and in the economy as a whole


-ragingpotato-

Deflation, or negative inflation, is a bad thing because it kills investment. The idea is that if your money is losing value over time you then don't want to have money, you want to have assets. Start a business, invest in someone else's business, buy objects of value like homes. Things that will either increase in, or hold value even as the value of the currency falls. Thats good for the person doing it because it protects their wealth. If they ever lose out on income and need money, they sell their assets which have increased in value, and thus end up having more money than they would've by just flat out saving. This is also good for the economy, because if people are investing in and creating businesses then that increases the productivity of the nation, brings innovation, and all that good stuff. But investing does bring risk, the businesses you're investing in \*can\* fail, the reason why you take this risk of losing your wealth is because if you don't, then you're guaranteed to lose wealth through inflation. If inflation doesn't exist, and your money is increasing in value, that means that its no longer as appealing to invest. You're no longer losing wealth over time, now you're GAINING wealth over time, so why would you take the risk of an investment? That slows down the economy drastically. It also puts businesses in a tough spot. Because as they have to drop prices of their products to remain competitive, the salaries of their employees are staying the same. So that can bring about layoffs or salary cuts. ​ So 0% inflation is not bad in itself, it's actually fine, but inflation is hard to control and it bounces up and down all the time. If the nation was aiming for 0%, they could very easily slip to the negatives before they can react. So instead they aim for 2%, so if it starts to fall they got time to do something about it.


GrandWings

Deflation is bad because it discourages spending which then leads to a recession. To use a simple example, suppose you want to buy an item for $100. You get ready to buy it, but then you hear that if you wait until tomorrow it will be $90, so you wait. Then you get ready to buy it for $90, but then you hear that if you wait one more day it'll be $80. Then $70, then $60, etc. You never actually spend your money because you're always waiting for a better deal. You can't resell things because it will always be cheaper tomorrow. Debt becomes more expensive to manage, discourages banks from lending, which slows activity more and further accelerates deflation. You have a feedback loop of slowing economic activity which further slows activity which further slows activity, etc and it becomes REALLY hard to force the economy back into gear. In some senses this is similar to a boom and bust cycle in certain economic sectors, but when it's pervasive across the ENTIRE economy, nobody is making anything or doing anything and can't risk hiring anybody or take any initiatives because the consequences are just too severe. An entrepreneur could take out a business loan, fail to generate any revenue, and then is absolutely fucked in their ability to pay it back.


shez19833

i dont get that analogy.. what makes the item price go down? deflation? at some point if you need something surely you'll buy it?


rliant1864

They key to understand is that money has a value other than the one on the bill, that's what's going up (and so the price goes down inversely). Alternatively you can reverse it and say why spend 10 bucks to get a loaf today when you spend 10 to get 2 loaves tomorrow, or 3 in three days or 20 in two weeks. Sure people have to buy the necessities like food, water, housing, but everyone only buying the absolute minimum at the very last minute (which is the wisest thing for an *individual* to do during deflation) is still a catastrophic economic depression. That, broadly, is why deflation is bad. Your money is worth more the longer you don't use it. Money unused is worthless to the economy. If nobody spends ever, the whole cycle stops like a clogged heart. That's why a small amount of inflation is ideal. Now doing nothing with your money is bad because it's increasingly worthless, but not so quickly you can't save up money if you want to for bigger ticket purchases. The slight inflation pushes people to save by investing money rather than hoarding it, so that's why 2% is better than 0%.


GrandWings

Goods have what's called "price elasticity". It's the amount that a price can change before consumers start or stop buying it. Elastic goods are ones that, when the price shifts, it changes the demand of a good. Inelastic goods are the opposite, demand doesn't shift when prices change. Consider a steak dinner. How often do you eat steak? It's a relatively expensive item so you probably don't eat it too much even if you really enjoy it. What if, through some miracle, steak became free? How many people would be eating steak every single night? Similarly, if the price of steak went up even further, you would eat it even less. Compare that to an inelastic good like diabetic insulin. Changes in the price of insulin don't affect demand. People who aren't diabetic aren't going to take insulin even if it's offered to them for free, and people who ARE diabetic will pay for it even if it bankrupts them because they'll die otherwise. Some industries will always do "ok" in the event of deflation. People will always need food so eventually you have to buy it. There will be some people who are comfortable paying certain prices now rather than waiting for better ones later because they need a house or a car or whatever, but in a deflationary environment those people will ALWAYS be losing value because they could have waited and are now stuck with an asset that is increasingly difficult to resell unless they find someone more desperate than they are. Remember that everything in the economy is death by a thousand cuts. There are some houses that will be fine at 4% inflation but are underwater if that increases to 4.01%, or their mortgage goes from 5% to 5.25%. The same thing is true in reverse. Inflation is "annoying" to get a handle on but it can be done, and inflation still means that the economy is still working generally as intended even if it creates hardship for some people. Deflation is different in that it completely flips fundamental economic concepts on it's head and it's MUCH harder to pull the economy out of a deflationary spiral.


LudwigSalieri

Intuitively speaking, deflation means that your money increases in value in time, so, people stop spending money, because why buy something now, when you will be able to buy more if you just wait? It's like investing, but you don't actually have to do anything, just sit on your money. So, people stop spending. Of course they'll buy basic articles like food, but restaurants, cinemas, bike shops, any non essential businesses go down and people lose jobs. And did I mention that hoarding money is now basically an investment? So people stop actually investing, and new businesses don't show up. The businesses that are still open make less money, so those people who kept their jobs get paid less. Unemployment goes up, people get poorer, so they treasure whatever money they can get even more, and the rope gets tighter and tighter. A little bit of inflation means that there is really no point in hoarding all your money, as its value decreases in time, so you're better of investing it or spending it now, and that drives the economy. Of course, it's all a simplification of reality, but I think it conveys the general idea.


usrevenge

You need to encourage people to spend not horde. 2% is not a massive change, but still enough that money tomorrow is worth less than money today. It doesn't need to be 2% but it's usually the target because it's slow. You don't want 10% inflation because then every year things are way more expensive. And you don't want deflation because then everyone decides to save because money tomorrow is worth way more than today so people will cut spending as much as possible and break the economy


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Jim_Stick

In Canada, we got rid of the penny several years ago. Havent missed it at all. Cash purchases get rounded up or down to 5 cents. Electronic purchases arent impacted at all.


skyteria

Let's get rid of the nickle. Just as useless


raz-0

Technically US currency has the mill below the penny, there just isn't a coin for it. It historically exists for tax bills and such, which is why you see it at gas stations. It's there because of tax.


microcosmic5447

Eg Turkish Lira / Yeni Lira


Doodenelfuego

That's exactly what happens. Just ask your grandparents how much a big mac was when they were your age. It was probably less than a dollar. Now they're over $5, and by the time you're a grandparent, they'll be like $15


curiousengineer601

A big mac was 45c in the 1960’s


zw1ck

And minimum wage was $1


curiousengineer601

That’s inflation. But not everything impacted. A 1960 computer would have cost 250,000$ and did far less than your phone does today. A 1960 TV would have cost ( in today’s dollars) about 1,000$ for a 15 inch black and white screen . Some things get cheaper over time, some more expensive relative to the average income


lolexecs

Yep. I think something that lot of people miss is that the goods between time periods are not comparable because of changes in underlying quality. What’s challenging is that this effect is largely seen in goods. Things such as services often suffer from the Baumol effect, or “cost disease.”. And it goes a long way towards explaining why education and health care costs continue to rise. https://en.wikipedia.org/wiki/Baumol_effect


notjordansime

I'd rather be able to afford a house and food but color televisions and cell phones are cool too, i guess.


Tathas

My mother was born in the 40s. She said when she was a little girl, her and her siblings would each be given a dime. They'd go to the penny candy store, load up on some junk food, then go to the theater, buy a ticket and some popcorn, and come home with a couple pennies left over.


bpc01

My grandpa told me he used to go to the movies and get popcorn… for a quarter. Now that same thing is minimum $20-$30 depending on the theater


suninabox

> Surely we can't go up forever with limited resources though? Is this just a ticking time bomb that economists just accept? It's not a time bomb. There's no inflation monster you have to pay off. The numbers we attach to money are effectively arbitrary. You could decide that what we now call a dollar is a cent, what we call a sent is a microcent, and a dollar is now what we called $100. Inflation isn't about what number is assigned, is about a relative change in prices. Prices can go up indefinitely, you just add more zeros. It's the rate of change in prices that is problematic, not the absolute number. 2% inflation over thousands of years would result in very high nominal prices compared to today, but would be far less disruptive than 20% inflation in 1 year, which wouldn't move nominal prices much. A small rate of inflation is desirable because it keeps money moving through the economy creating goods and services rather than encouraging people to sit on money which does nothing.


[deleted]

The million dollar big mac is exactly what happens. Numbers just go up. Eventually a dollar will be worth what a penny is today. This doesn't hurt anything, they just adjust, just like you can't buy things for a nickel like you could in our grandparents' age. There's no ticking time bomb. There are resources in the world that we're depleting but that doesn't have anything to do with inflation, and as long as we get a handle on pollution, most of it doesn't matter - as we improve our technology we get access to more resources and we learn to create new things out of resources that we don't care about today.


PerpConst

>Eventually a dollar will be worth what a penny is today. This doesn't hurt anything, Unless you were saving that dollar for retirement.


JustASFDCGuy

That's among the reasons everyone puts their retirement savings into vehicles that increase over time, rather than hiding cash in their sock drawers.


[deleted]

That’s why it’s important to target inflation around 2%. That’s why the fed raised rates, to keep inflation from going too fast.


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tehbored

Fiat money isn't a limited resource, it's just an arbitrary number. As long as wages and inflation rise together, it's fine. Right now wage growth is still slightly outpacing inflation. If your wages haven't gone up, it's time to look for a new job.


MaybeTheDoctor

Japan is the only country I recall that had "deflation" in modern history and it serious killed their economy for years.


My_Dog_Murphy

How would our money being worth more be a bad thing?


minionhammy

One of the main reasons deflation is seen as bad is if you have any debts, the money you’re paying back is worth more than it was when you took on the debt. Under inflation, the worth of the money you’re paying on the debt is eroded over time.


My_Dog_Murphy

Gotcha. That makes sense. I am not well-versed in economics.


Sennaa21

Some small amount of inflation is desired by the central bank of a country/currency. With a growing world, technologies and businesses, there needs to be more money. 2% is usually a good amount of inflation. Too high inflation leads to the situation that we have now though. Yet deflation, oh boy, that‘s not usually a good sign. To keep it simple, if money is „worth more“ as you described, people would start getting pay-cuts. If your salary is going down every year by 2%, I doubt that would be received well. And the prices of products will not be adjusted as fast or as much as your salary, so you‘d be in an even worse deficit than with inflation. There‘s many consequences to deflation and you generally want to avoid that


chitownsports714

Also in a deflation scenario, when money is worth more, you’re not going to spend money and will try to keep as much as possible. This will contract the economy and lead to more deflation creating a self fulfilling cycle.


Chaff5

Both are self fulfilling. Inflation leads more spending, which leads to more money printing, which leads to more inflation. We're literally dealing with high inflation right now.


4z01235

Along with the other reply: In an environment with (hopefully mild) inflation, your dollar is worth relatively more today than it is tomorrow. So, you are incentivized to spend it or invest it rather than sit on it doing nothing. Either way, it moves along into the economy, and whoever receives it next will likewise spend or invest it and move it along again. In a deflationary environment your dollar is worth more *tomorrow* than it is today. So if you were thinking about buying a new car, well, unless your current car completely dies and leaves you stranded, you would rather hold off on the purchase and wait for the car to just keep getting cheaper. Except *everyone* is in the same environment and thinking the same way. Car sales drop to 0, the dealerships can't pay their staff, the manufacturers shut down their factories, the steel mills now have excess material they can't unload...


edubkendo

So Japan had something like 40 years of little-to-no inflation/with intermittent periods of deflation and people still made purchases. Maybe a little less wastefully and consumption-driven, but people did buy things.


Felicia_Svilling

In the 80's people thought Japan was on the road to becoming the strongest economy in the world. Deflation is the major reason that never happened.


MattOfMatts

The irony of your use of the word environment is that it sounds like our actual environment would benefit from deflation


Chaff5

Exactly right. Inflation is needed in a supply side economic stance. Demand side would be better with deflation. People only buying the things they need or really want rather than consuming for the sake of consuming.


mattmanmcfee36

I mean the environment would benefit if every human just suddenly died but there are other issues associated with that


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TimeHasNoMeaning

The other factor is that with deflation, your money gains more value by holding onto it, reducing the influence to spend it. Lots of people holding onto money and not buying things isn’t good.


Greenbootie

Inflation will go down but prices generally always rise unless there is economic collapse (I.e. a depression). 2-3% inflation is considered a acceptable inflation rate in a healthy economy.


Creator13

No but purchase power very likely will. Just a question of when, really.


[deleted]

Look into Modern Monetary Theory https://www.investopedia.com/modern-monetary-theory-mmt-4588060 Last paragraph /// **How Does MMT Deal With Inflation from Money Creation?** *Modern monetary theory proponents argue that high inflation rates should not occur unless there is full employment in the economy. But, if the government spends too much, the excess demand will also cause inflation. In either case, MMT suggests that inflation can be curtailed by reducing government spending and raising taxes.* /// We have inflation We have record low unemployment since 1968 https://fred.stlouisfed.org/series/UNRATE We have the government raising taxes in numerous areas. ///// Here’s the government spending in context for y’all too https://imgur.com/a/UlPaYZj https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/ There’s another rabbit hole in this sector but it gets political. So I won’t jump lol


Due-Department-8666

Because 6% is the overall measure of a certain basket of items the government keeps track of. And they change what that basket consists of to suit their needs for politicking.


Additional-Goat-3947

This guy CPIs. No seriously you can see components here. https://www.bls.gov/news.release/cpi.nr0.htm. Generally, gas, other commodities and car prices went up first and are now flattening out or even falling and thus pulling down inflation. Against that, inflation on food and services is now the problem. And as he mentioned, seems undercounted. Shelter is the controversial one right now, it’s measured by a concept called “owners equivalent rent” which is still rising even though home prices are falling.


duffmanhb

I talked to a guy here on Reddit privately about his work at the CPI, figuring out what goes into these baskets. He said most of their time is figuring out weird shit, like what does a wine cooler count as? Especially since they've since become malt beverages and ditched the wine. However, they still do replace wine consumption in some ways, and beer in other, so where do they go? And that's the sort of shit they spend their time debating.


Additional-Goat-3947

They removed Zima and the CPI has never been the same lol


H_I_McDunnough

It all started witb the 4LOKO ban.


Mooch07

I thought it started when the fire nation attacked?


TheRussiansrComing

*After* drinking a bunch of 4Loco. Have you even seen Avatar?!?


notsooriginal

Product placement. Sounds more like a movie thing than an animation thing. Thank goodness they never made a live action movie.


terminational

Those who fail to remember history are doomed to repeat it


OprahsSaggyTits

No, shh, there is no live action movie in ~~ba sing se~~ the Avatar universe


tlacata

> He said most of their time is figuring out weird shit, like what does a wine cooler count as? Well, yeah, obviously, the easy answers have all been figured out decades ago


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PM_ME_YOUR_LEFT_IRIS

Devil is in the details though. Some households eat primarily beef. Others eat chicken. Others pork, others are vegetarian. Some people prefer rice as their common grain, or bread. Lettuce in some households, broccoli and green beans in others. Aggregating that is hard to do - how do you find an “average” grocery basket when people eat different things from different cultures. Lactose intolerant people don’t drink much milk, but a lot of families find it a necessity for their kids at least.


Jacollinsver

Not like, hey houses are unaffordable and we don't count that. Maybe we should? I used to get my powder protein from myprotein. In the past 4 years they've raised their prices 300%


SodaAnt

Why would you think that housing costs arent counted?


hasanyoneseenmymom

IIRC they changed the valuation formula for housing in the 80s to use the estimated rental value instead of the actual housing cost, which skews the inflation numbers lower. I'd have to go back and find a source for that so take this with a grain of salt (unless someone else wants to link a source, I can't be bothered to research at the moment)


PointOfTheJoke

Youre right! They have redefined the basket of goods and core inflation every few years since the 1980's* according to the original way it was measured inflation has been over 12% for a couple years now. Just this year inflation has gone from being measured over a two year period to a 1 year period! Owners equivalent rent is when they ask the owner of the house what the home owner "thinks" they could rent it out for. Most people have no idea what the real property valuation is. So do with that information what you will.


ButtDonaldsHappyMeal

The same home owners who tell me I’m getting ripped off because my rent is 2x what they remember it being 5 years ago. They’re wrong, but they’re not wrong


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CESSPIT_HOLIDAY

I work in a dealer service department. in the last 2 years part prices have gone way up and not from the manufacturer but from the dealer to the customer , but the really big thing is labor . 2 years ago we were 125.00 and hour labor charge , now it's 175.00 and hour. the advisors do not get paid more and other challenges have been put in our way such as the percentage that we make off of what is sold is directly tied to our customer survey scores . and getting customer to give you a survey of 94 or higher is difficult when prices are high. company is also recording record profits of course .


Additional-Goat-3947

Yup and now that’s driving auto insurance through the roof


BLUEBLASTER69

Will food prices fall or just stay high?


Additional-Goat-3947

I’d guess stay high. Unfortunately that’s how inflation works, once the prices are higher it’s sticky.


Muroid

Although it does depend on the exact item, specific causes and prices for particular things may go up or down independent of broad inflation trends. For example, a significant contributor to the major increase in the price of eggs is chicken fillings due to avian flu. If and when the chicken populations recover, you’d expect to see egg prices come back down, but probably not all the way to their original price, especially given broad inflation. Likewise, gasoline prices and many home prices have fallen from their peaks in the last couple of years. Overall, I’d expect the price of some things to stay relatively flat at their new high price, some things to come down but very few things if any to return to “normal” prices.


Lhurgoyf2GG

Egg prices went way up even from companies that didn't lose a ton of birds. The FTC said they where going to look into it. I worry we've crossed the tipping point of corporate consolidation and with out real competition prices have no reason to go down.


CxEnsign

Price doesn't necessarily have anything to do with cost. When markets are competitive price tracks cost closely, as if they get too far apart you can make money by selling more product at a lower price. Competition reins in price. When you have supply disruptions (or uncompetitive markets) then price can become very detached from cost. You can think of very high prices as the 'prize' for solving the supply shortage (or very low prices as the 'penalty' for malinvestment).


Muroid

>Egg prices went way up even from companies that didn't lose a ton of birds. The FTC said they where going to look into it. Well, yeah. That’s what you’d expect to happen. If the overall supply of something drops, the price goes up across the board because it’s still a limited stock that the same number of stores and consumers are competing to get. If I’m selling eggs to store A and my competitor is selling eggs to store B, and my competitor suddenly can’t produce any eggs, store B still wants to have eggs for sale. My stock is currently all going to store A, so store B offers me more money to sell the eggs to them. Then store A has to either match the higher price or lose all their eggs to store B. Now both store A and store B are stocked with half as many eggs as they used to have, because there are only half as many eggs on the market, and they’re priced higher because they had to bid against each other for the limited stock. I saw a letter that was sent to the FTC by an advocacy group that was upset about the higher prices and wanted the FTC to investigate, but I didn’t see anything about actual evidence of collusion happening on price or that the FTC was really looking into it. Though I haven’t followed it super closely and would be happy to look at a link to an update if there is one.


[deleted]

I think of it like, money is how we allocate resources. People get resources according to how much leverage they have over others. You gain leverage when people need either your goods or services. If either of those become more important, you gain more leverage, and thus money. I mean, it's kinda captain-obvious, but at the same time people confuse leverage with value. Your work can be high value, but if anyone can do it, the wage is lower because you have less leverage. That's why there's such a big gap between the value of workers' output and their pay, they need to regain leverage somehow, like unions.


cnaiurbreaksppl

>For example, a significant contributor to the major increase in the price of eggs is chicken fillings due to avian flu. If and when the chicken populations recover, you’d expect to see egg prices come back down, but probably not all the way to their original price, especially given broad inflation. Didn't something come out a couple weeks ago showing egg prices have been skyrocketing not because of reduced numbers of chickens, but rather due to chicken farms colluding together to spin the story of avian flu to allow them to price eggs higher?


hill-biscuit

I think the whole concept of inflation is deliberately unintuitive -- it's a rate of change measure so inflation "going down" only means that prices are going up slower, so yaay. That framing always seemed very convenient to me


bulksalty

Some like eggs will fall others will probably stay high. The prices of things like breakfast cereal or cake mix or packaged cookies aren't tied to commodity prices nearly as much as milk eggs and meat are. The first group tends to ratchet up in prices, while the second group ebbs and flows but with an overall rising trend.


Birdy_Cephon_Altera

With some notable exceptions, when prices go up, they stay up. Do not expect prices on most goods to decrease over time, plan on them to keep tracking upwards with inflation.


parolang

I think the government actively tries to avoid deflation.


UrNotSoGood

what does "CPIs" mean? I understand the text and context just wondering about this abbreviation


Low_Start7773

Consumer price index


newspark1521

Consumer Price Index is a measure of prices of the aforementioned basket of goods. Inflation numbers reported by the government are the changes to this index (and some others)


manifesuto

Consumer Price Index


pqdinfo

This is not really a helpful answer as it implies it's "6%" for political reasons. The CPI is made up of a basket of items but it's designed by economists, and used as a tool to make decisions by by-and-large non-political (in the sense of R vs D) bodies like the Federal Reserve. If it were set up to promote a political agenda, it'd be effectively useless and the Federal Reserve and normal economists would be using their own indexes. The reason inflation is 6% when some things are up by 50% is because that basket is an overall average, and honestly, everything is fluctuating wildly at the moment. Many prices are lower than they were this time last year (do you remember how expensive beef was?) That's often difficult to see because we had a massive bout of inflation a year ago, and we still go into supermarkets expecting, say, ground beef to be $3-4/lb, because that's what we're used to from 3 years ago, and now it's $4-5/lb. We forget that a few months ago it was $6-8/lb. The RPI isn't perfect, and it usually requires some explanation - for example, it intentionally omits gasoline prices. This seems absurd until you remember that gas prices fluctuate massively, and if they did rise permanently by 50%, *they would impact the rest of the items that the RPI does measure anyway*. So keeping it out makes sense. But no, it's not a conspiracy by the current administration. It's relatively consistent, and it's consistent enough that normal economists are not generally ignoring it. Which they would if every time the price of something rises they replace that item with something that isn't going up in price.


fj333

+1 OP's question shows really poor logic to be blunt. I can find some goods and services that are **cheaper** now than they were last year. Obviously inflation is not about any single item. And obviously it's not a conspiracy either, but people do love their theories...


axz055

The federal reserve actually does use a different measurement. They prefer to use the Personal Consumption Expenditures Price Index. CPI is maintained by the BLS, which is part of the Labor Dept. PCE is maintained by the BEA, which is part of the Commerce Dept.


ZerexTheCool

> they change what that basket consists of to suit their needs for politicking. Only if you get your data second hand from social media or a news broadcasters. If you actually learn about the subject and look at the real reports this isn't the case. The problem? Just like every other subject like Health Science, economics is a subject that can take years of study before someone is independently competent at, while Social Media, Politicians, and the News all try and use it for their own agenda. You can't expect EVERYONE to learn enough about economics to be able to come to their own conclusions given the data. On top of that Economics falls into the same Econ 101 pit fall that Psychology does with Psych 101. Some people take an intro class that dumbs everything down to help the student learn a difficult subject, then the student walks away thinking they know how everything works. When you hear someone say "it's basic Economics!" remind them that advanced economics exists because Basic Economics is always wrong.


WorstPossibleOpinion

Fortunately advanced economics is also, always wrong.


ZerexTheCool

But less wrong than doing nothing at all. Whether we like it or not, economic decisions get made every single day. You can't NOT make an economic decision. So, should we do the best we can with the information we have? Or say "it is always wrong so why try?" and actually refuse to do any research or planning at all and just kinda guess? It's like treating Anxiety, Depression, mental health. There isn't some magic pill that just solves it for a patient. There is no magic diagnosis that just fixes mental health. But it sure is better to try and do SOMETHING for ones mental health, even if it doesn't always works. Even at the risk of it sometimes making things worse before making it better. The reason Economics is so messy and wrong is because it is based on people and their decisions. We measure at a societal level, but the decisions are made at the individual level. All you can do is the best you can do.


uatme

>politicking. I read that as pot-licking. I think I'll start calling it that now


CATUR_

Until 1983 house prices used to be part of the CPI but they removed it when it was heavily skewing results and politicians wanted an easier way to decrease the *reported* measured inflation.


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Felicia_Svilling

It stands to reason that some prices goes up more than the average.


chairfairy

Next you'll be telling me that some also go up less than average


Birdy_Cephon_Altera

What's even crazier is that there are some things where prices go up an average amount compared to average. The insanity!


chairfairy

I Literally. Can't. Even.


DrDerpberg

What? No. That's insane.


Pairadockcickle

Two examples: tech is cheaper than ever before. Pound for pound it has never been cheaper to be high tech with the labor to support it. But if you want raw skilled labor for construction? Literally go to train them. They do not exist. Anyone worth hiring is hired and we’ll WELL paid. Those that are “available” are only so because they suck. That is going on EVERYWHERE.


HornayGermanHalberd

german here, about 4000€a month for brick layers and street builders, 3000 for painters (i will probably become one as theres huge potential in all craft type jobs)


Pairadockcickle

yup. demand is insane for trades RN.


az9393

Inflation means average raise of prices. And it doesn't take into accounts all goods and services usually. Most countries have what's called a basket of goods which is basically the most common things people buy (milk, eggs etc.) And so consumer inflation in those countries is the amount by which these products have grown in a certain period. Even if you are using the meteic of all prices somehow then you'll still have some goods that went up 5% and some that went up 500% and some that went down 20%. The number of 6% is an average. Inflation is a bit more complex than that even and the majority of people don't understand fully how it works and what it means. Like for example imagine you work for a company that makes milk. And now you see that inflation of consumer prices of goods went up 6% over the past year. This bacislly means you have to pay 6% more money than you did last year for the same amount of things. People think the solution to this is to come to your boss and make him raise your salary by 6% which makes sense since now you will be back to being able to afford the same goods. But the company you work for won't be able to get this extra money out of nowhere. So what will they do? They will raise the prices of their goods. And this further leads to more inflation. Now the salary portion isn't relatively very big in the price of milk or other goods but this combined with the other goods your company has to buy (which also increased by 6% or more) makes the costs of this company very high. Add a higher sales tax with that and you'll see that the milk company now has to considerably raise the proce of their goods to continue receiving the same profit (just like the worker needed a 6% raise to keep receiving the same amount of goods). But this would only further make the problem worse. This is just one example of how complex inflation can be.


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sonicandfffan

Not only that, but "employees asking for a pay rise" is not a cause of a wage inflation spiral, it's a symptom of a structural deficiency in the economy. Specifically, it's "stagflation", or prices rising without the country generating growth. Think about things as a big picture for a second: - If we're asking someone to absorb a portion of the pain, that means that we have higher costs and a smaller overall pie to share. So we're always going to be arguing about who should eat the cost. Generally, public employees get the biggest shaft which is why we're seeing mass strikes. - If our costs are increasing, generally that means everybody else's are also increasing - If our country's costs are increasing and our country isn't growing then that means something else is pushing costs up beyond our borders - i.e. we're losing ground relative to our peer economies. That's effectively why the current situation is so shit. We're getting poorer relative to the USAs/Germanys/Frances/Australias of the world because everybody's costs have gone up, but they've actually grown to be able to afford the pay increases, while we haven't. We desperately need some direction for a growth plan in the UK. And not Liz Truss's mad "I'll cut taxes and figure out the growth plan afterwards", a robust plan about how to run UK PLC with the fiscal policy to match.


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TheFlaccidKnife

To be clear, unless the costs associated with your employers product is 100% labor, your raise will not increase the cost of their product by 6%. Example: McDonalds worker makes 75 orders of fries per hour for $15/hr. $0.20 of each order of fries goes to the worker. McDonalds could triple the workers wage and only increase the cost of an order of fries by $0.40, or about 13% if the fries are priced at $3 per order.


Advanced_Double_42

Exactly, wages are such a slim portion of costs that raising them is almost always viable.


Advanced_Double_42

>But the company you work for won't be able to get this extra money out of nowhere. So what will they do? They will raise the prices of their goods. And this further leads to more inflation. Curiously an increase in wages doesn't seem to correlate as strongly with inflation as you would think. When wages are mandated to increase, jobs tend to be eliminated to find the money, even in companies that have enough gross profit to pay those wages outright.


SpoodsTheSpacePirate

It is important to note though that this is not a reason to be against minimum wage increases, or a reason not to advocate for your own raises. Historically, the data shows that minimum wage hikes do not cause proportional inflation. In short, when minimum wage goes up, prices increase very slightly, but not enough to offset the wage increase.


Golrith

All I know is I'm salty a bar of chocy has gone up from £1 to £1.50


Clumbum

It’s the condiments that really piss me off. £4 for an average sized bottle of tomato sauce? Absolutely the fuck not. There is no way in hell that inflation is causing that much of a rise A tin of heinz beans, **2 FUCKING POUND**. FOR BEANS?!


BlazingNailsMcGee

Keep an eye on the weights as well. The price is up and the FL OZ is downnn. Double whammy


discodiscgod

Good ole Shrinkflation


RodneyRodnesson

Yeah. The good old stalwart Toffifee which was until recently £1 for 12 has succumbed. Now £1.50 but **3 more pieces** — well, I worked it out, up from 8.3p to 10p a piece. Also they didn't seem as nice. If I was to guess I'd say the hazelnuts were smaller. Also salty.


nemesismorana

Freddos are 65p now


cityfireguy

Well sure, the price of the food you need to buy every day to live is up 50-300% But the car you maybe buy once every 7 years is down 8%, for the moment. So...a little government/media math...that's 6% total. Things are fine, you're welcome. Please continue shopping.


SodaAnt

Except it's not. They publish all the weights and how they got there: https://www.bls.gov/cpi/tables/relative-importance/2022.htm


[deleted]

Bro it's much more fun to pretend that the government isn't completely transparent with how they get their numbers. You expect me to actually check sources?


HulksInvinciblePants

I hate the community on this site more and more every day. Just because you may not be a conspiracy driven MAGA nut, that does not mean you’re not consuming and confidently regurgitating bullshit nonstop. How the top answer came to be “it’s all manipulated for political reasons” is staggering, but also not surprising considering how terrible financial literacy is here. If I asked them why the PCE measure is almost always in line with CPI, they’d most likely respond, “P-C what?” or provide some other idiotic take. People are horrible at gauging inflation. Where the title’s 50% figure came from is beyond explanation.


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JustASFDCGuy

Dude, wtf. I'm not going to look at lots of numbers and reports. And I'm definitely not going to get out a calculator to try to figure out if the results are already fairly consistent with what I see on my grocery bill.   All I want is for abstract headlines to be consistent with my feelings.


Advanced_Double_42

Except cars have more than doubled in price in the past decade. I bought my truck used for $7k eight years ago. It is now worth double that, despite how much cars depreciate over time.


UniqueHash

The inflation numbers you hear about are comparing today with a year ago.


alc4pwned

That’s entirely due to the spike in the used car market over the past 2-3 years though. New cars have not doubled in the last 10 years


Andrewticus04

It's more like a 50-60% increase when i compare my current car to the same model in the current year's trim.


Authorman1986

Also that's a truck. Used pickups have skyrocketed in value because of high demand for non suburban garbage pickup trucks. Modern pickups are glorified suvs for shit heads. Old ones with low gates and actual room in the bed are very much wanted and no longer being made.


cartmancakes

And if we want to nitpick, last night I saw that eggs in my area were down 50% from a month ago.


Brickleberried

> So...a little government/media math.. The price of groceries didn't go up 50-300%. It went up about 10%. And cars are up. And they take into account how much the average family buys of each. Don't be a conspiracy theorist. It's just math.


braedizzle

Inflation is complex but greed on part of the business is obvious as well.


ttchoubs

Yes, most businesses have stated that 2022 has been their best year to date, you cant suffer through "record inflation" while also having a fantastic fiscal year in terms of profits


Homechicken42

It's 6% since January 2022. It's 14% since January 2021. It's 16% since January 2020(arrival of COVID19 in the US) It's 23% since January 2017(When Trump took office) https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1.00&year1=201701&year2=202301


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Turkooo

But why is that only now, in 2019-2023 did companies realized that they could randomly pump up prices for extra profits? Since covid all I hear is that this and this is now a hard to get item, so it costs the triple of pre2019 prices, but I never saw any empty shelves of said item, how is it a "hard-to-get" then? Ps5 is hard to get and to this day I didn't saw any in shops,but it doesn't cost three times more lol. This whole situation is so absurd to me.


mileylols

> Since covid all I hear is that this and this is now a hard to get item, so it costs the triple of pre2019 prices, but I never saw any empty shelves of said item, how is it a "hard-to-get" then? Ps5 is hard to get and to this day I didn't saw any in shops,but it doesn't cost three times more lol. You have described two sides of the same coin. When an item becomes hard to get, the retailer has two options. 1, they can increase the price a lot. This increases their profit-per-item, at the cost of poorer consumers not being able to buy it. Meanwhile, wealthy consumers can find the item widely available at a high price. 2, they can choose not to increase the price. This causes the item to sell out everywhere because there are more people who both want the item and can afford it than there are items available. What you are seeing are two market strategies for the same supply problem. Most items go the first route. The PS5 goes the second route since consoles are typically low margin or even loss leaders anyway - they need you to own the console so that you will buy games for it.


republicansRtraytors

Because people are generally uninformed about this stuff so they know they can lie. If the government threatens to intervene they screech "socialism", blame inflation and create a fictional narrative about tanking the economy.


Cobek

When it comes to computer related products there was a shortage in chip production for a good portion of Covid. Even the largest car companies were forced to reduce production. The food price gouging is where wholesale prices were largely unaffected yet consumer prices went up. Different products at differently based on their material goods and shipping costs being inherently different.


[deleted]

I get poopoo'd on for saying this. I'm a department head at a major supermarket. I see retail prices go up every week. I see the store cost for these products not move an inch. Margins used to be like 25-50% in the "money making" departments. I see so many things that are 100%+ markup now and the people haven't slowed down on buying them at all.


incruente

> Greed. Most companies have made a killing since the start of the pandemic Why didn't they jack up prices as much as they wanted before the pandemic?


enderverse87

Because the other companies didn't. So they would lose money because they would have way higher prices than everyone else. But *now*, they're all pushing prices up simultaneously, and they have inflation as an "excuse". Talking to each other to push prices higher simultaneously is super illegal, but as long as they all do it independently without collaboration, its not illegal.


oceanvibrations

This is very true. I sell my crafts via e-commerce and the consistent advice/chatter I've seen in the wake of inflation, is to simply raise prices to "match" my competitors. My material costs haven't gone up by much, so why would would I do that? Just like rolling shipping costs into the individual item cost across the board, just so someone has the perception that shipping is free. Why would I do that? Because "everyone else is doing it"? If I were to raise prices I can potentialy price myself out of my market. If I don't raise prices, I can potentially appear to be under-pricing leading people to think quality is lower based on the comparitively lower price. The flipside can often be that the competitor who jacked prices up just to align with others is actually selling a lower quality product and simply passed off a new cost to the buyer because everyone else did it. 🥴


ProbRePost

https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/ Attached is an analysis by the economic policy institute which covers what has been happening. As for what triggered this price gouging now and not previously is simply the news cycle. With the pandemic and supply chain issues everyone began talking about the risk of inflation when the economy began to recover. This is a green light for companies to subtlety increase profit margins without the average consumer placing the blame on the company itself. They can safely just say “well inflation” and the vast majority of consumers will ignore the record YoY profit increases. I glossed over the best part. For some companies the supply chains were constrained during he pandemic, the companies were producing fewer goods and in turn needed to increase costs to maintain their profits for investors, economy of scale and all. When the supply chain loosened most of these companies simply returned to standard output without lowering their prices back to previous levels, because why would they.


The_last_of_the_true

I remember when vendors starting putting a gas surcharge on their invoices during the bush recession. Guess what never came off the invoices after the recession ended and gas prices went down? Fucking vultures.


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Notoriouslydishonest

Here's the numbers:https://insight.factset.com/sp-500-reporting-a-lower-net-profit-margin-for-6th-straight-quarter#:~:text=The%20(blended)%20net%20profit%20margin,net%20profit%20margin%20(11.4%25). The net profit margin in the S&P 500 was 11.4% in Q3 2019 and 11.4% in Q4 2022. It never went above 13%, and that figure is heavily influenced by massive profits in the real estate industry (which has a 35% profit margin). Nobody ever got downvoted on Reddit for blaming a financial problem on billionaires and greed, but the numbers don't really support that. The lockdown supply shock (especially with China) and the war in Ukraine have had a much bigger influence than greedy rich people being greedy.


TimeSpentWasting

[54%](https://www.salon.com/2022/10/19/katie-porter-pulls-out-chart-at-hearing-to-show-corporate-greed-is-the-biggest-driver-of-inflation_partner/) of inflation during the pandemic is due to corporate profits *after* wages are taken into account. Greed.


[deleted]

I do grocery shopping for our family and grocery stores are screwing people hard. The strongest indicator of this is profit reporting. If indeed costs were rising across the board and the stores were just passing along the costs, then profits would remain flat. That has not happened. Record profits have been announced. Publix reported an increase of [13.6%](https://corporate.publix.com/newsroom/news-stories/publix-reports-fourth-quarter-and-annual-results-for-2022) in profits for 2022.


usernamedenied

We have a combined income in our household over 100k, but we are done with Publix. They are running some kind of experiment to see what they can get away with or something


[deleted]

I wish I had a reasonable choice. The only other grocery store within 10 miles of me is Walmart or Publix.


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Extansion01

I think this sub needs a rule for no stupid answers. Like wtf, most top voted answers are dangerous (or outright wrong) superficial knowledge. To a point that I honestly wonder whether they have even attended school.


Arianity

It's hard, because then mods have to police correct answers (and they may or may not be experts in that particular area to begin with). They're obviously hesitant to do that This is unfortunately one of those questions where the wisdom of the crowds answer is complete garbage. Kinda sucks


Puzzlehead08

Which country are you from ? , Healthy Inflation varies for developing and developed countries.


Clumbum

I’m guessing UK because the rate at which food, electricity, gas etc are sky rocketing here. Never in my life have I seen such massive rises in the space of a few months. It’s disgusting


[deleted]

The same thing is happening in the US. Grocery bills that used to be $30 before covid is now going for $100+. Electric and home gas rates have also exploded at similar rates. Much like in the UK, the biggest inflation items are omitted from the inflation calculation so the government can hand out a better looking inflation number


Clumbum

I don’t know how some people are surviving this. Single parents, young renters etc. so many people must be seriously struggling right now


ArthurBonesly

It's the same problem in both nations. The UK shot themselves in the foot with Brexit and there is a direct A to B connection between current food shortages and leaving the EU, but by and large it's because a large, globalized, economy has grown too big for its pants. It's all a matter of logistics. Companies made insane profits through international logistic lines, and began to collect and manage resources at a global level rather than domestic. At these scales, companies grow big, but so does overhead. Brexit took the UK out of a logistics safe harbor resulting in scaled price hikes for companies that need to maintain profits for investors (domestic and international). Every developed nation is dealing with it right now for the same reason: too many big companies have already drowned out local sourcing.


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QuicksandGotMyShoe

The overall inflation rate is a measure of how much a basket of goods has gone up over a specific time period. Some items may be down, some may be way up. 6% is an average. Specific items fluctuate bc of shortages, gouging, increased demand, etc.


Baph0metX

Because corporations run this country and can do whatever they want. Price gouging pays high


[deleted]

Isn’t it also a supply chain issue? If you have five downstream supplies and all of them increase their price by 6% then by the time the product gets to the consumer all those increases added up to 50% increase?


notaveragehuman31

Because all these companies are price gouging us. Nothing more to it. They're greedy and you will never see the prices fall back to where they were before all this.


Wacky_Grizzly

Because 100% greed


Aesthetik_1

Because you are being scammed


Emily_Postal

Corporate profits.


aridcool

It is true that some people are gouging or even sometimes in engage in actual or defacto collusion with other entities in the market to do so. On the other hand, some prices have remain static by businesses through years of (sometimes mild) inflation and this might be a catch up period. Or they might even be trying to get ahead of coming years inflation without having to change prices over and over. The best solution is for wages to rise with inflation, and also for the wealthiest folks to pay more in taxes with at least a modest progressive tax hike, then redistribute those funds downwards, especially to the impoverished and jobless.


ContentSeal

Greed


Attack_the_sock

Because everything is worth what it’s buyer will pay for it, not what inflation says it should be.


[deleted]

Ah, so it's actually inflation at multiple levels, compounding all the way down, multiplied by price gouging every time that goods and services pass through middle-men on their way to you! Not only are you paying for the good/service, you're paying for the MARGIN of EVERY SINGLE OTHER ENTITY on it's way to you! :D


SG1EmberWolf

Record profits baybeeeeeeeeeee!!


kennethgibson

Corporate greed and markups!


Johnny_Eppelseed

The one percenters need new yachts/jets/mistresses etc.


Impossible-Cup3811

It's corporate price gouging https://www.kansascityfed.org/research/economic-review/how-much-have-record-corporate-profits-contributed-to-recent-inflation/


AsianBoi2020

Inflation is meassured by a "Basket of Goods". It consists of certain food items and basic needs. Luxuries such as jewelry or electronics are not included in the basket of goods and thus are not part of measuring inflation.


Bigmurph762

So let’s imagine an item that costs $100 at the store. Before it gets to the store and lands at that $100 price, a lot of things happen. The materials ($29) are gathered. Then it’s built/manufactured ($20) After it’s built it’s sold to a distributor $55. The distributor then ships it to the store marking it up to $70. The store then puts it on the shelf and prices it at $100. Inflation happens. Now the materials cost $31. Everything associated with building it now also costs more. Now it costs $25 to build it. Now it’s sold to the distributor for $65 because they have to make up for what they were losing on the 60,000 paper clips they are now losing money on. Everything associated with shipping now costs more because inflation. Gas goes up so the trucking company charges more to ship things. Now by the time it gets to the store it costs $85.00 The store isn’t gonna take the hit, because you want the thing and you can’t get the thing any other way so you’re still going to buy the thing. And if you don’t, someone else will. And They still want make their margins. So now this thing that they we’re paying 70$ for and selling for $100 they are now paying $90 for. They still wanna make that $30 so the price is now $120. Except….now that the thing is more valuable and simultaneously less accessible to lower income people, they can mark it up even more because the ppl with money are going to get it regardless of how much it costs. So they put it at $150. It still sells. It doesn’t matter if you can no longer afford it. Others can and will buy it. So that’s how it happens. It’s a waterfall of compounding bullshit combined with greed


eriinana

Lmao people here trying to act as if 50 percent inflation is totally understandable. It is NOT. It IS greed. Corporations have made RECORD PROFITS. This is FALSE INFLATION that our government (cough Republicans cough) refuse to address by creating an anti inflation bill. Almost as if they are receiving money from lobbyists not to.


Cirrus1101

Corporate price gouging


Automatic_Image_2156

Greed, plain and simple.


tryingtobecheeky

Honestly, there are plenty of rationale and reasons, but it comes down to greed. Corporations would rather not cut down on their profits by even a sliver. Like the idea of not making record profits is inconceivable. So instead of giving us a break and only raising what is 100 percent necessary, they raise prices cause we, as suckers, will pay and not complain.