Comment by Manuel_D
2 years ago
> Covid caused supply chain issues, unaffected supply chains independently raised prices because people were willing to pay it.
But that's not "greedflation". That's literally a normally functioning market. If Company A and Company B produce a largely interchangeable product, and 50% of Company A's output is lost due to shortages both companies are going to sell their products at a higher price point. The fact that Company B's output was unaffected doesn't change the fact that their product is now in more demand due to Company A's production shortfall.
After the supply chain issues eased, people had loads of savings from the lockdowns. This is a big reason why companies were seeing record profits in the post pandemic period: because people were spending in record numbers. Is it surprising to see record profits in a period of record spending?
“Greedflation” would be when those companies kept prices up after their supply chain had returned to normal. Competition will chip away at that but that’s going to be slow if you’re in a market with only another megacorp trying the same thing.
But has demand gone down? The gummed up supply chains created a lot of pent up demand. It's going to take a while to satisfy that demand. Compounding this, pandemic checks injected a massive amount of dollars into the economy [1].
It's simplistic, but take this analogy. A factory builds 1,000 doodads per year. COVID shut it down for a year. Then after COVID it starts producing 1,100 doodads per year. It's going to take 10 years to satisfy the pent up demand. Of course the real world is more complicated, but the fact that prices remain high after the supply chain issues are resolved isn't at all indicative of nefarious or anti competitive behavior.
1. https://fred.stlouisfed.org/series/M2SL
Correct. It's pretty sad to see such fundamental lack of understanding of economic principles.