Understanding Inflation and Price Gouging
By Region 8 Webmaster John Davis
Inflation is the most popular topic on people’s mind these days. Everyone is feeling the pinch as prices inch upward. However, the current inflation is the result of price gouging by corporations, using capitalism to line their pockets while hurting working class Americans to pad their pockets.
Principals of Capitalism
The basic premise of capitalism is “laissez-faire”, a French term that literally means “leave alone.” In other words, government is not supposed to initiate any intervention. “Let the market decide” is the idea that supply and demand will then set the price.
The United States has a consumer driven economy operating on the principles of capitalism.With that in mind it is generally believed there are four social classes in the United States; upper, middle, working and lower. The upper and middle classes had disposable income, while the working class typically has to spend what they make to live and lower classes don’t usually earn enough to cover basic living needs.
COVID Impacts Economy
The world is entering the third year of dealing with the Corona Virus Pandemic. In 2020, the spread of COVID 19 impacted Americans in a number of complicated ways. In the early days of the pandemic the only sure way to avoid the virus was to stay home. This created an impact on the economy, as sales slowed and jobs were lost. Unemployment soared creating a further domino effect of the economy.
There was another impact from the pandemic. Personal savings grew in this country. The upper classes (wealthy) historically spend a lower percentage of their income because they consume a disproportional amount of wealth. The middle class saw their savings grow, while even the working class began to save. The combination of concern over possible job loss, to the elimination of spending disposable income resulted in more savings. According to the Federal Deposit Insurance Corporation (FDIC) savings as a percentage of disposable income rose from 7.2% in December of 2019 to 33.7% in April of 2020. The wealthy already were saving, so this meant that middle and working class Americans began to grow their personal wealth, as they stopped going shopping, stopped eating out and stayed home. The FDIC report states that from the spring of 2020 until summer of 2021, personal savings grew by two trillion dollars. (Read More Here)
The Economy Bounces Back-Corporations Take Advantage
The introduction of vaccines, mask and social distancing resulted in lower transmission rates by the summer of 2021. As going out got safer, American consumers began hitting stores sitting on bank accounts that were a lot fatter than they were prior to the pandemic. The first area affected by this was the oil market. During the pandemic oil consumption dropped dramatically. From the fourth quarter of 2019 to the second quarter of 2020, oil consumption fell from 100 million barrels a day to 85 million barrels a day. This sent oil prices from a $100 a barrel to essentially being worthless as oil companies saw inventories skyrocket. As a result production was cut worldwide. The price at the pump went down as the supply grew. Then in the summer of 2021 as consumers started venturing out, the supply began to shrink and prices began to climb. As Oil Company profits soared, production was not increased to inflate the price of gasoline using our good friend supply and demand. Consumers began to spend this extra money they had, again impacting supply and demand. As groceries started flying off the shelves, supply and demand saw grocery prices soaring. Clothes were being bought resulting in higher prices. Inflation at the moment is a direct result of supply and demand and let the market decided- the principles of capitalism.
There is another name for the inflation we are seeing- price gouging. Corporations are running prices as high as they can because of demand. These companies are recording record profits. Do you know where that money is going? To their rich executives and investors while the middle, working and lower classes see their buying power diminished and that two trillion dollars in savings move to the upper class.
Let’s compare year over year numbers a few of these corporations and see how they are faring.
Tyson Foods- Tyson’s Fourth Quarter 2022 earnings at 12.9 billion dollars, twice what they were in the first quarter of 2021, pushing their stock price by 12%. Tyson blames prices on cost increases. Their first quarter profit was 11% with additional cost. First quarter 2019 (before the pandemic), Tyson turned a profit of 6.53%. First quarter of 2012, Tyson posted a profit of 4%. Tyson owner John Tyson saw his personal wealth increase by $300,000,000 on the day the profits were announced and stock soared 12%. Inflation is setting at 7% but Tyson is seeing profit margins three times higher than post pandemic times. (Read More Here)
Procter and Gamble- P&G produces everything from disposable diapers to toilet paper. In April of 2021 P&G announced they were “having to raise prices due to increased material cost.” On March 31, 2021, P&G announced a first quarter operating profit of $3.785 billion dollars and an operating income of 20.9%. P&G profit for the third quarter of 2021 was $5.06 billion for an operating profit of 24.7%. The company used that profit to buy back $3 billion of its stock so they can pocket even more of the profit. (Read More Here)
Exxon Oil Company- First quarter 2022 Exxon posted a $9.3 billion dollar profit. Fourth quarter 2021 Exxon posted a $6.6 billion profit. These numbers are a seven year high. Couple that with the fact that Exxon alone gets $2.4 billion of your tax dollars a year in subsidies from the federal government while paying half the standard corporate tax rate.
Price Gouging
These are just three examples of the many corporations that are using a pandemic to take the $2 trillion dollars the middle and working class saved during the pandemic. How can they get away with this? Easy, corporations have swallowed up the competition to the point they are fewer competitors to have to price against. The last time this is happened was in the late 1930s just prior to the great depression.
These companies along with their corporate media are trying to blame inflation on the government. This is a false narrative. It is the price gouging by these companies taking advantage of Americans in a crisis. Laissez-faire and supply and demand economics are coupling to price gouge the American consumer and transfer wealthy to the wealthy and they are doing this under the guise of inflation.
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