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Greedflation Is Real · Stuff You Should Know

• 0:01
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  Speaker 2: Welcome to Stuff you Should Know, a production of iHeartRadio.
• 1:04
  Speaker 1: Hey, and welcome to the podcast. I'm Josh and there's
• 1:06
  Speaker 1: Chuck and Jerry's here somewhere and this is stuff you
• 1:10
  Speaker 1: should know. The Timely Topical Edition. I haven't done one
• 1:14
  Speaker 1: of these in a while.
• 1:15
  Speaker 2: Job. Yeah, Fight the Power Edition.
• 1:19
  Speaker 1: I guess. So kind of seems that way, doesn't It
• 1:21
  Speaker 1: Like there's really very few ways to discuss this and
• 1:25
  Speaker 1: not kind of come out on that side.
• 1:28
  Speaker 2: Yeah. I'm kind of glad you picked this one because
• 1:31
  Speaker 2: with all the talk of you know, food grocery store
• 1:33
  Speaker 2: prices and stuff, in the back of my mind, I've
• 1:36
  Speaker 2: been thinking, like, all right, I know there were some
• 1:39
  Speaker 2: reasons for this, but I also wonder if they just
• 1:43
  Speaker 2: raised prices a lot because they could, right, and that's
• 1:48
  Speaker 2: kind of what happened.
• 1:49
  Speaker 1: Yeah, it true seems that way, Like I think, kind
• 1:53
  Speaker 1: of at the end of the day, the discussion over
• 1:56
  Speaker 1: what we're talking about, which is called greedflation, which is
• 1:58
  Speaker 1: a fairly new right. The idea isn't that food companies
• 2:06
  Speaker 1: made massive profits over the last few years, starting in
• 2:10
  Speaker 1: the pandemic, right, Like, There's just basically no way you
• 2:13
  Speaker 1: can argue that that didn't happen. It's been documented. The
• 2:17
  Speaker 1: issue at hand is whether that constitutes something beyond the
• 2:22
  Speaker 1: norm of capitalism, or is that just that's what happens
• 2:26
  Speaker 1: in the free market when there's you know, weirdness to it.
• 2:30
  Speaker 1: You know, that's the that's the question. In my mind.
• 2:34
  Speaker 1: What it really comes down to is your interpretation of
• 2:37
  Speaker 1: whether there's I don't know, maybe some sort of basic
• 2:40
  Speaker 1: moral responsibility for certain kinds of companies or companies that
• 2:44
  Speaker 1: deal in certain kinds of goods to not just make
• 2:47
  Speaker 1: as much money as they possibly can. I don't know.
• 2:50
  Speaker 1: I think that's the that's the actual debate over it.
• 2:53
  Speaker 2: Now, let me ask you this, is it possible to
• 2:55
  Speaker 2: be a person who says, you know, I'm at that
• 3:00
  Speaker 2: percent behind capitalism and let it run amok and that's
• 3:04
  Speaker 2: just let it work itself out, and then also complain
• 3:08
  Speaker 2: about food prices like can those things co exist?
• 3:11
  Speaker 1: Yes? Those people are called the worst.
• 3:15
  Speaker 2: Okay, so it can co exist. I think so people
• 3:19
  Speaker 2: you don't want to hang out with.
• 3:20
  Speaker 1: Right exactly?
• 3:21
  Speaker 2: Okay?
• 3:21
  Speaker 1: Yeah. I think conversely too, you can be totally pro
• 3:24
  Speaker 1: capitalists and still be like the idea that it's just
• 3:28
  Speaker 1: business is kind of a moral.
• 3:30
  Speaker 2: Yeah.
• 3:30
  Speaker 1: I don't think you have to you have to pick
• 3:33
  Speaker 1: one side or the other. I think that it's a
• 3:35
  Speaker 1: little grayer than that.
• 3:36
  Speaker 2: All right, shall we jump in.
• 3:38
  Speaker 1: Yeah, let's so. Ultimately what we're talking about are increases
• 3:42
  Speaker 1: and prices at the grocery store on levels that we
• 3:45
  Speaker 1: just haven't seen before. Like, you're not crazy, the prices
• 3:48
  Speaker 1: at the grocery store are bonkers. Apparently, in twenty twenty
• 3:52
  Speaker 1: two in America, the inflation for food at grocery stores
• 3:57
  Speaker 1: increased eleven point four percent, and then in twenty twenty
• 4:01
  Speaker 1: three it added another five percent, and that was, you know,
• 4:06
  Speaker 1: half a little a little more than half of what
• 4:09
  Speaker 1: the increase had been in twenty twenty two, but it
• 4:12
  Speaker 1: was still double with the normal annual increases of two
• 4:16
  Speaker 1: point five percent, that's how much food typically inflates year
• 4:19
  Speaker 1: over year at the grocery store. Instead, in two years,
• 4:22
  Speaker 1: it inflated by almost seventeen percent. Wow. Yeah, And there
• 4:26
  Speaker 1: were reasons for this, Like there's a standard narrative, which
• 4:29
  Speaker 1: is there's just a handful of reasons that everybody points
• 4:32
  Speaker 1: to like this is why.
• 4:33
  Speaker 2: Yeah, and there's you know, we're going to talk I
• 4:35
  Speaker 2: guess a little bit about kind of the standard explanations
• 4:39
  Speaker 2: that we've been hearing for the past couple of years,
• 4:41
  Speaker 2: which we're not saying is you know, bunk or anything
• 4:45
  Speaker 2: like that, because, as you'll see, I think is a
• 4:47
  Speaker 2: pretty even handed episode. We might get a hot hot
• 4:52
  Speaker 2: under the collar, but I think there's reason to be
• 4:55
  Speaker 2: So here we go. So one thing you will hear
• 4:58
  Speaker 2: and have heard a lot is, you know, the pandemic's
• 5:01
  Speaker 2: obviously a big reason for all this, the biggest driver
• 5:04
  Speaker 2: of it, and the disruptions to the supply chain. Whether
• 5:09
  Speaker 2: you were building a house or whether you were a
• 5:13
  Speaker 2: food company marking up your goods, the supply chain squeezed out.
• 5:17
  Speaker 2: It seems like everything on the planet, and there were
• 5:21
  Speaker 2: food item shortages, there were ingredient shortages, and that was
• 5:26
  Speaker 2: one of the drivers for inflation.
• 5:28
  Speaker 1: Yeah, even packaging shortages. Like a good example is that
• 5:32
  Speaker 1: caffeine free coke was temporarily discontinued because there was a
• 5:36
  Speaker 1: shortage of aluminum, which meant that coke had to basically
• 5:39
  Speaker 1: ration their cans, and regular coke sells more than caffeine
• 5:42
  Speaker 1: free coke, so they just basically focused on coke for
• 5:46
  Speaker 1: a little while. Yeah, that caused a shortage. It was
• 5:49
  Speaker 1: just that sort bizarre and meandering in some cases, right.
• 5:52
  Speaker 2: Yeah, which had nothing to do with raising prices, But
• 5:54
  Speaker 2: that's just a side.
• 5:55
  Speaker 1: Note, right, it's true. Yes, you're right.
• 5:59
  Speaker 2: So people ate at home a lot more during the pandemic, obviously,
• 6:03
  Speaker 2: so there was more demand that you know, these goods
• 6:05
  Speaker 2: were in shorter supply, and all of a sudden, there's
• 6:08
  Speaker 2: more demand for fewer those goods. And that is just
• 6:11
  Speaker 2: inflation one on one as far as how things get
• 6:14
  Speaker 2: out of control.
• 6:15
  Speaker 1: Right. And then so if you are a processed food company,
• 6:18
  Speaker 1: you have to use ingredients, and a lot of ingredients
• 6:23
  Speaker 1: were scarcer, and the cost of the ingredients went up, right,
• 6:27
  Speaker 1: So that means that they raised their cost because they
• 6:31
  Speaker 1: raised the prices of their products because their costs increased,
• 6:34
  Speaker 1: So their marginal cost, which is the cost to put
• 6:37
  Speaker 1: everything together and deliver it and all that stuff package
• 6:39
  Speaker 1: it increased, which means they increased their markup their profit,
• 6:45
  Speaker 1: which means you put those two together, the price increases
• 6:48
  Speaker 1: in unnecessary clue GI economic terms.
• 6:51
  Speaker 2: Yeah, and we're going to talk more in depth about
• 6:53
  Speaker 2: this stuff, obviously, but you know, usually if there's like
• 6:57
  Speaker 2: if it's you know, if it's not a pandemic, and
• 6:59
  Speaker 2: they're just happens to be an ingredient that is getting squeezed,
• 7:02
  Speaker 2: and so the cost of making a bag of Cheetos
• 7:05
  Speaker 2: or something costs more. They're not gonna companies aren't gonna
• 7:08
  Speaker 2: be like, oh, we've got to raise a price. Then
• 7:09
  Speaker 2: they'll just sort of absorb that to keep the prices
• 7:12
  Speaker 2: kind of steady and keep things flowing. That wasn't the
• 7:16
  Speaker 2: case during the pandemic.
• 7:17
  Speaker 1: Though, No, and Chuck, that is that is a key
• 7:19
  Speaker 1: thing to understand, is what we are seeing those markups,
• 7:23
  Speaker 1: the difference in the price and the cost of the
• 7:26
  Speaker 1: company's pay to actually produce the product. Like that, that's
• 7:33
  Speaker 1: we've just never seen anything like this before. Economists are like,
• 7:36
  Speaker 1: I've never seen anything like this before in my forty
• 7:40
  Speaker 1: years of studying you know, food delivery and food supply
• 7:44
  Speaker 1: chain stuff.
• 7:45
  Speaker 2: Yeah, and then people said, you've been studying that for
• 7:47
  Speaker 2: forty years, and.
• 7:49
  Speaker 1: The guy's like, yes, someone please let me stop exactly.
• 7:54
  Speaker 2: And then another thing that we heard here and there was,
• 7:57
  Speaker 2: you know, people got stimulus checks. A lot of people
• 7:59
  Speaker 2: did when unemployment was just so staggering during the pandemic.
• 8:05
  Speaker 2: So the government issued these checks. People had a little
• 8:10
  Speaker 2: more money in their pocket to spend, which was the idea,
• 8:14
  Speaker 2: and demand increased and so that push prices higher. The
• 8:19
  Speaker 2: thing is though Europe experienced the same inflation we did,
• 8:24
  Speaker 2: sometimes even worse as far as food costs go, and
• 8:27
  Speaker 2: they didn't get stimulus checks. So that one is a little,
• 8:31
  Speaker 2: I don't know, confusing.
• 8:32
  Speaker 1: I guess it is. This way to say it, it is,
• 8:35
  Speaker 1: but just based on classic economic theory, there's just no
• 8:39
  Speaker 1: way it didn't have some impact, you know what I mean? Yeah, sure,
• 8:42
  Speaker 1: in a way. You can also point to it as
• 8:45
  Speaker 1: being a very unusual factor that took place within the
• 8:49
  Speaker 1: context of a larger unusual period, which was the pandemic. Right,
• 8:54
  Speaker 1: you also had other things going on at the same time,
• 8:58
  Speaker 1: Like the pandemic wasn't enough. There were tons of bouts
• 9:01
  Speaker 1: of Avian flu that was killing hens left and right,
• 9:04
  Speaker 1: and I guess friar roasters, Yeah, the kind you eat too,
• 9:09
  Speaker 1: those chickens. So there was less chicken to go around
• 9:13
  Speaker 1: and less hens to lay eggs, which meant the price
• 9:15
  Speaker 1: of eggs and poultry would increase. What's interesting about that
• 9:20
  Speaker 1: is that as more hens were hatched and started laying
• 9:24
  Speaker 1: more eggs and the supply came back, the price of
• 9:26
  Speaker 1: eggs went down, And that is weird in the context
• 9:30
  Speaker 1: of what's been going on lately too.
• 9:32
  Speaker 2: Yeah, absolutely, and we'll talk about eggs more because, believe
• 9:36
  Speaker 2: it or not, eggs are a big story yet, you
• 9:39
  Speaker 2: know story. And then, of course, the thing we heard
• 9:42
  Speaker 2: a lot about was the war in Ukraine. That was
• 9:44
  Speaker 2: another sort of coexisting situation alongside the pandemic, which disrupted
• 9:50
  Speaker 2: wheat exports. You know, when you're a European country the
• 9:54
  Speaker 2: United States and you squeeze sanctions onto Russia, there's gonna
• 9:58
  Speaker 2: squeeze right back, and well, we've got oil that we're
• 10:01
  Speaker 2: not going to supply you anymore, and that's just going
• 10:04
  Speaker 2: to that squeezes everything. And all of a sudden, grain exports,
• 10:08
  Speaker 2: especially wheat, went up, which affects the cost of a
• 10:11
  Speaker 2: lot of foods.
• 10:12
  Speaker 1: Yeah, because the global economy is so interconnected that like
• 10:16
  Speaker 1: if if Europe is paying higher energy prices, that's definitely
• 10:20
  Speaker 1: going to affect the price of the things that American
• 10:22
  Speaker 1: companies are importing from Europe, right. Yeah, So all those
• 10:26
  Speaker 1: things put together added up to that unprecedented increase in
• 10:30
  Speaker 1: prices in the grocery store.
• 10:32
  Speaker 2: All right. So those are a lot of the reasons
• 10:34
  Speaker 2: that we've been hearing about, you know, over the past
• 10:37
  Speaker 2: few years. But as far as like, what this actually
• 10:39
  Speaker 2: looks like in a grocery store. I thought, you know,
• 10:42
  Speaker 2: we thought it'd be helpful if we break down just
• 10:43
  Speaker 2: what this looks like for just a person walking in
• 10:46
  Speaker 2: a grocery store.
• 10:47
  Speaker 1: Okay, so I'll be that person walking. Yeah, I've got
• 10:50
  Speaker 1: a hat on. Just imagine I have a cool hat on. Okay,
• 10:52
  Speaker 1: I don't I'm walking into the ground.
• 10:54
  Speaker 2: I don't know that I've ever seen anywhere hat.
• 10:55
  Speaker 1: Weirdly though, like I look weird right now.
• 10:58
  Speaker 2: Well, it's because you're wearing a hat and.
• 11:00
  Speaker 1: I'm walking in place.
• 11:01
  Speaker 2: But weirdly, I think I've seen you walk in place,
• 11:04
  Speaker 2: but I've never seen you where I hat. So if
• 11:07
  Speaker 2: you talk to the USDA, they will say the price
• 11:09
  Speaker 2: of food in the United States is twenty five percent
• 11:12
  Speaker 2: higher this last year in twenty twenty three than it
• 11:15
  Speaker 2: was in twenty nineteen. What and that was higher than
• 11:20
  Speaker 2: every other category on the planet except for transportation. And
• 11:24
  Speaker 2: that's why people are probably like you should also do
• 11:27
  Speaker 2: one on why airline by it costs, you know, one
• 11:29
  Speaker 2: thousand dollars to fly from Atlanta, New York. Now it
• 11:33
  Speaker 2: doesn't really a no, that's not true, but just airline
• 11:37
  Speaker 2: tickets are ridiculous now. Yeah.
• 11:40
  Speaker 1: Do you remember when you used to like get on
• 11:42
  Speaker 1: a plane and to be like a third full and
• 11:44
  Speaker 1: they'd still take off. They didn't cancel it.
• 11:47
  Speaker 2: Yeah, Which that's no good, Like let's fill the planes.
• 11:49
  Speaker 1: Up, for sure. But I mean, like, but true. Now
• 11:52
  Speaker 1: it's just cutthroat. It's like the oppas. It's like, oh,
• 11:54
  Speaker 1: you paid for your ticket a month ago, ts you're
• 11:56
  Speaker 1: off the flight.
• 11:57
  Speaker 2: Yeah yeah, and the expense anyway, all that to say
• 12:00
  Speaker 2: that food food prices rose over that three year period
• 12:05
  Speaker 2: or four year period, more than any other category except
• 12:07
  Speaker 2: for transportation. And I believe you already talked about the
• 12:12
  Speaker 2: food increase percentage wise. But if you're in a grocery store, sir,
• 12:17
  Speaker 2: with a hat weirdly walking in place, why don't you
• 12:19
  Speaker 2: start coming forward?
• 12:21
  Speaker 1: Okay, here, I come take off.
• 12:23
  Speaker 2: Your hat when you entered like a good gentleman.
• 12:25
  Speaker 1: No, I'm going to leave the hat on. Okay, sure,
• 12:27
  Speaker 1: it's a really cool hat.
• 12:29
  Speaker 2: And you might notice that that loaf of bread over there,
• 12:32
  Speaker 2: just that white sandwich bread is twenty two percent more
• 12:35
  Speaker 2: expensive than it was just two years ago. God, and sir,
• 12:39
  Speaker 2: I see you're thinking, like, well, forget that I'm gonna
• 12:42
  Speaker 2: bake my own bread. Well, good luck with that too,
• 12:45
  Speaker 2: because that all purpose flour is twenty one percent more
• 12:48
  Speaker 2: expensive and butter is thirty one percent more expensive. So
• 12:52
  Speaker 2: I don't even think about baking a birthday cake.
• 12:54
  Speaker 1: I can't even get a break on butter.
• 12:56
  Speaker 2: I can't even I know butter is. I mean that
• 12:59
  Speaker 2: stuff right off the stick.
• 13:01
  Speaker 1: So so okay, I'm still the guy in the hat.
• 13:04
  Speaker 1: I'm moving down another aisle. I'm like nuts. To make
• 13:06
  Speaker 1: it my own bread, I'll just eat a bunch of
• 13:08
  Speaker 1: ultra process stuff because that's dirt cheap. Everybody knows that.
• 13:12
  Speaker 1: Surely that hasn't increased in price.
• 13:15
  Speaker 2: No, no, And since you said nuts, why don't you
• 13:18
  Speaker 2: go ahead and get some of those nuts because they're
• 13:20
  Speaker 2: about sixteen percent more expensive.
• 13:23
  Speaker 1: Well, they make me pack on too much weight anyway,
• 13:25
  Speaker 1: so I'm fine with that.
• 13:26
  Speaker 2: And by the way, sir with the hat, I want
• 13:28
  Speaker 2: to remind you that these stats for process foods are
• 13:32
  Speaker 2: just over one year. WHOA, from twenty twenty two to
• 13:35
  Speaker 2: twenty twenty three. You're paying sixteen percent more for the salties,
• 13:39
  Speaker 2: sixteen percent more for those cookies, eighteen and a half
• 13:42
  Speaker 2: percent more for that granola bar you think is held.
• 13:45
  Speaker 2: And if you want a little fruit snack, almost twenty
• 13:47
  Speaker 2: four percent more expensive. Not the fruit snacks, yes, the
• 13:51
  Speaker 2: fruit snacks.
• 13:52
  Speaker 1: Chuck. This skit has gotten.
• 13:54
  Speaker 2: Really dark, as dark as Halloween.
• 13:58
  Speaker 1: Pretty dark. Oh actually, no, you're right. Halloween was a bloodbath,
• 14:03
  Speaker 1: especially if you're talking fun sized Snickers, because get this,
• 14:07
  Speaker 1: this is crazy. I mean even Halloween. Normally Halloween prices
• 14:10
  Speaker 1: are beyond nuts. But this is just really bad. A
• 14:14
  Speaker 1: bag of fun sized Snickers went from twenty twenty two,
• 14:19
  Speaker 1: or sorry, went from twenty twenty one to twenty twenty two,
• 14:22
  Speaker 1: It increased by one hundred and forty percent. You could
• 14:26
  Speaker 1: have gotten a bag of fun sized Snickers for five
• 14:28
  Speaker 1: bucks in twenty twenty one. You paid twelve dollars the
• 14:31
  Speaker 1: next year.
• 14:33
  Speaker 2: All right, well there's nothing fun about that.
• 14:37
  Speaker 1: Okay, So the skits over and scene or end scene,
• 14:41
  Speaker 1: depending on your view. And I'm gonna keep wearing my
• 14:44
  Speaker 1: hat though, Okay, all.
• 14:45
  Speaker 2: Right, keep that hat on. That's a good setup, and
• 14:47
  Speaker 2: we'll be right back with more.
• 15:17
  Speaker 1: Okay, So there's something to remember too, Like it sucks
• 15:20
  Speaker 1: to pay a lot at the grocery store, but if
• 15:22
  Speaker 1: you are a low income family or a low income country,
• 15:27
  Speaker 1: it hits you even worse because food prices increases in
• 15:31
  Speaker 1: food prices are regressive. They have the largest impact on
• 15:34
  Speaker 1: the people who have the least amount of money because
• 15:37
  Speaker 1: those people spend a far greater proportion of their household
• 15:40
  Speaker 1: budget or their national budget on food than wealthier people do.
• 15:46
  Speaker 1: They just have less money, so they still need food.
• 15:50
  Speaker 1: It's not something that you can skip very easily, and
• 15:53
  Speaker 1: eventually you're going to have to eat, so it's an
• 15:56
  Speaker 1: essential thing to buy and you don't really have much
• 15:59
  Speaker 1: of a say in it if the food prices keep rising.
• 16:03
  Speaker 1: So it's really important to keep that in mind that
• 16:05
  Speaker 1: it's not just an annoyance, it's not just in your pocketbook.
• 16:09
  Speaker 1: It actually has pushed people into poverty classes in different
• 16:14
  Speaker 1: countries and developed countries because food prices got They were
• 16:19
  Speaker 1: kind of close on the border to begin with, and
• 16:21
  Speaker 1: then the pandemic came along and as the food prices increased,
• 16:24
  Speaker 1: they were pushed into poverty categories.
• 16:27
  Speaker 2: Yeah, if you look at the Food Price Index, the
• 16:30
  Speaker 2: five categories meat, dairy, cereals, vegetable, oils, and sugar increased
• 16:36
  Speaker 2: fifty seven percent all over the world. Over a two
• 16:40
  Speaker 2: year period from twenty twenty to twenty twenty two, and
• 16:43
  Speaker 2: then a couple of years later here in twenty twenty four,
• 16:47
  Speaker 2: some prices have come down some quite a bit, eggs especially,
• 16:52
  Speaker 2: and again we'll talk about eggs a little more. They're
• 16:54
  Speaker 2: ones that really kind of reset back down again, but
• 16:59
  Speaker 2: not everything. And just over a two year period, a
• 17:02
  Speaker 2: fifty seven percent increase in meat, dairy, cereals, vegetable oil,
• 17:07
  Speaker 2: and sugar is going to have a real impact, like
• 17:10
  Speaker 2: you said, on families in the United States that don't
• 17:13
  Speaker 2: have as much money, and certainly hundreds of millions of
• 17:16
  Speaker 2: people all over the world in countries that didn't have
• 17:19
  Speaker 2: so much money to begin with.
• 17:21
  Speaker 1: Right, So that's that's one side of it. Like this
• 17:24
  Speaker 1: is actually affecting and impacting people in very extreme ways. Yeah,
• 17:29
  Speaker 1: So on the one hand, you have people who are
• 17:31
  Speaker 1: being pushed into poverty. On the other hand, you have
• 17:34
  Speaker 1: the food producers who are benefiting tremendously, like again, in
• 17:39
  Speaker 1: like record degrees in some cases.
• 17:42
  Speaker 2: You mean these hundreds and hundreds of corporations that own
• 17:47
  Speaker 2: all these food companies, right.
• 17:48
  Speaker 1: No, Chuck, do you have five fingers and five toes
• 17:52
  Speaker 1: on each hand? And foot still. Yes, well, then you
• 17:55
  Speaker 1: can more than count the number of conglomerates essentially running
• 17:59
  Speaker 1: the food supply in the developed world.
• 18:02
  Speaker 2: Yeah. I mean, we were being kind of cheeky there,
• 18:04
  Speaker 2: but we've talked about this before the fact that they're
• 18:07
  Speaker 2: just a handful of huge corporations that own almost every
• 18:11
  Speaker 2: food And you know, this is obviously discounting the little
• 18:15
  Speaker 2: indie brands and stuff like that. They're out there doing
• 18:17
  Speaker 2: their thing. Most of those are trying to get bought
• 18:19
  Speaker 2: by one of these companies.
• 18:20
  Speaker 1: Yeah, yeah, I was going to say more and more.
• 18:22
  Speaker 1: They're a portfolio of one of these larger brands.
• 18:26
  Speaker 2: Yeah, looking for that you know, big big money exit
• 18:29
  Speaker 2: and you know, good for them. But point is, there
• 18:32
  Speaker 2: are just a handful of these big corporations and if
• 18:35
  Speaker 2: you ask, if you sit down any of their CEOs
• 18:37
  Speaker 2: and grill them over this cost increase, they're going to
• 18:41
  Speaker 2: talk about those things we talked about at the beginning.
• 18:43
  Speaker 2: They're going to be the pandemic demic. Inflation was out
• 18:46
  Speaker 2: of control and there wasn't anything we could do. We
• 18:48
  Speaker 2: were forced to raise our prices to remain profitable. And
• 18:52
  Speaker 2: we're not saying that you shouldn't make a profit or
• 18:56
  Speaker 2: anything like that. Like, we get it that these are
• 18:59
  Speaker 2: for profit company, and those costs definitely did go up,
• 19:02
  Speaker 2: and they maybe could not take that all on the chin.
• 19:06
  Speaker 2: We're not arguing for that. But if they then raised
• 19:11
  Speaker 2: those costs and said, all right, well we have to
• 19:13
  Speaker 2: account for this to so we don't lose our profit margins,
• 19:16
  Speaker 2: and they accounted for that, then their profit margin should
• 19:19
  Speaker 2: have been about the same and they should have been like,
• 19:21
  Speaker 2: all right, well, we didn't lose a lot of money.
• 19:22
  Speaker 2: We stayed about the same because we accounted for those costs.
• 19:25
  Speaker 2: But that's not what happened.
• 19:26
  Speaker 1: Yeah, their profits didn't didn't increase in step with their costs.
• 19:31
  Speaker 1: They increased plus some right, plus a lot, right, plus
• 19:35
  Speaker 1: a lot. So Tyson Foods a huge producer of chicken
• 19:40
  Speaker 1: in the United States, and the first quarter of twenty
• 19:44
  Speaker 1: twenty one to the first quarter of twenty twenty two,
• 19:46
  Speaker 1: they doubled their profits, not their revenue. Their profits. Yeah doubled. Okay,
• 19:52
  Speaker 1: one hundred percent times two doubled. Yeah, that's important, and
• 19:57
  Speaker 1: that's one year, year over year. Gill another huge conglomerate.
• 20:02
  Speaker 1: They had a record six point sixty eight billion dollar
• 20:04
  Speaker 1: profit in twenty twenty two, double its profit two years before.
• 20:09
  Speaker 2: Yeah, and overall, food corporations had their largest profits during
• 20:15
  Speaker 2: the pandemic, during peak inflation, when everyone was getting squeezed
• 20:19
  Speaker 2: and hurt. The most food corporations recorded their largest profits
• 20:23
  Speaker 2: in seventy years.
• 20:25
  Speaker 1: Right, And some of them even did while they were
• 20:28
  Speaker 1: losing sales, like General Mills. Sales were declining by like
• 20:33
  Speaker 1: nine percent in twenty twenty one and another four percent
• 20:35
  Speaker 1: in twenty twenty two, and yet at the end of
• 20:37
  Speaker 1: twenty two twenty two, their profits were up ninety seven
• 20:41
  Speaker 1: percent over the twenty twenty one I believe. So here's
• 20:45
  Speaker 1: where the sticking point is, Chuck, this is where where
• 20:49
  Speaker 1: views diverge because this is documented fact. Is that is
• 20:54
  Speaker 1: that just to be expected? Like, do people who are
• 20:57
  Speaker 1: mad about this greedflation idea not understand and basic capitalism
• 21:02
  Speaker 1: or do they have a point in saying like this,
• 21:05
  Speaker 1: this is approaching and probably has passed a morality?
• 21:10
  Speaker 2: Yeah, I mean that's a question if you look we're
• 21:12
  Speaker 2: talking about corporations, but if you look at people. There
• 21:15
  Speaker 2: were sixty two new new food billionaires over that two
• 21:21
  Speaker 2: year span from twenty twenty to twenty twenty two, and
• 21:25
  Speaker 2: they calculated this is Oxpam who calculated this stuff. That
• 21:29
  Speaker 2: the food billionaires, which that those two words is interesting
• 21:33
  Speaker 2: together food billionaire, those food billionaires made more money during
• 21:38
  Speaker 2: the two years of the pandemic than they did in
• 21:40
  Speaker 2: the previous twenty three years combined. That's I mean, that's
• 21:45
  Speaker 2: the stat of the show.
• 21:46
  Speaker 1: So economists like have started to dig into this, and
• 21:48
  Speaker 1: just like about anything else, there's liberal economists, that's a
• 21:51
  Speaker 1: conservative economists, And depending on where you fall, you probably
• 21:55
  Speaker 1: either agree, like, yes, this is greedflation or you're like, no,
• 21:58
  Speaker 1: people don't understand, this is just basic capitalism.
• 22:02
  Speaker 2: Yeah, we can look at actual numbers though, to help
• 22:05
  Speaker 2: people make up their own mind. There's a nonpartisan group
• 22:07
  Speaker 2: called the Economic Policy Institute that we talked about before
• 22:12
  Speaker 2: on the show, and they looked at factors that contributed
• 22:15
  Speaker 2: to these higher prices over the last few years, and
• 22:19
  Speaker 2: they identified three major components of costs for a category
• 22:24
  Speaker 2: goods and services, which food was a part of. Which
• 22:27
  Speaker 2: are unit labor costs, which are you know, the workers,
• 22:31
  Speaker 2: what you pay a worker, their salary, their benefits, stuff
• 22:34
  Speaker 2: like that. The non labor costs energy costs, transportation, debt payments,
• 22:39
  Speaker 2: tax i imagine for the food part, like the actual
• 22:43
  Speaker 2: food stuff is in there, right, sure, yeah. And then
• 22:46
  Speaker 2: profit margin, which is that markup that we talked about
• 22:50
  Speaker 2: that you know, that's what's going to generate the profit
• 22:52
  Speaker 2: for the company. And so they looked since twenty twenty,
• 22:56
  Speaker 2: and prices in the non financial corporate sector, which like
• 23:01
  Speaker 2: we said, foods are part of that group, have increased
• 23:04
  Speaker 2: six six point one percent a year on average, which
• 23:08
  Speaker 2: is three times the pre pandemic rate of one point
• 23:12
  Speaker 2: eight a year.
• 23:14
  Speaker 1: Right, Okay, So they said, like under normal, normal circumstances,
• 23:18
  Speaker 1: all these costs are actually pretty well represented in a
• 23:22
  Speaker 1: steady way across the non financial corporate sector. Like inflation increases,
• 23:29
  Speaker 1: You can attribute increases in price, which is inflation to
• 23:33
  Speaker 1: those three things labor, non labor, and profit. You can
• 23:39
  Speaker 1: divide them up pretty pretty clearly. Normally, the largest contributor
• 23:45
  Speaker 1: to price increases are labor costs. In a normal economy,
• 23:49
  Speaker 1: they contribute about sixty two percent to inflation. The non
• 23:54
  Speaker 1: labor cost which is like you said, the costs that
• 23:56
  Speaker 1: to actually make the product and deliver it and all
• 23:58
  Speaker 1: that stuff, that's about twenty seven percent, And normally the
• 24:02
  Speaker 1: profit represents about eleven point four eleven and a half percent,
• 24:06
  Speaker 1: and you put all those things together, and that explains
• 24:09
  Speaker 1: the increase in prices year over year, which we call inflation, right.
• 24:13
  Speaker 2: Yeah, and that, by the way, was over a forty
• 24:16
  Speaker 2: year period.
• 24:17
  Speaker 1: Yeah, So that's, yes, exactly, That's what I'm saying, Like,
• 24:19
  Speaker 1: it's pretty stable or what has been stable over the
• 24:22
  Speaker 1: last forty years. Where it became totally unhinged from normalcy
• 24:28
  Speaker 1: is starting in the pandemic. It's starting about Q two
• 24:32
  Speaker 1: of twenty twenty, where everything just kind of went haywire
• 24:37
  Speaker 1: basically according to that normal forty year trend.
• 24:42
  Speaker 2: Yeah. So labor costs, which over that forty years previously
• 24:45
  Speaker 2: accounted for about sixty two percent of increase in costs,
• 24:48
  Speaker 2: accounted for less than eight percent this time. Right. The
• 24:53
  Speaker 2: non labor cost previously, if you remember, was twenty seven
• 24:56
  Speaker 2: percent that is now thirty eight percent.
• 25:00
  Speaker 1: So that's that that's that narrative of like the supply
• 25:03
  Speaker 1: chains and like Ukraine and all that stuff. That's what
• 25:06
  Speaker 1: that cost, that increase in cost represents.
• 25:09
  Speaker 2: Yeah, and then the you know what's coming everybody, uh,
• 25:13
  Speaker 2: that eleven point four percent over forty years of you know,
• 25:17
  Speaker 2: of the markup of the corporate profit that accounted for
• 25:20
  Speaker 2: an increase in prices went to almost fifty four percent.
• 25:24
  Speaker 1: And that nuts, I mean, there it is. Yeah, so
• 25:27
  Speaker 1: it's about five times the normal rate. During a pandemic,
• 25:31
  Speaker 1: food companies made about five times what they normally make
• 25:35
  Speaker 1: in profits on food.
• 25:37
  Speaker 2: Yeah, the end, can we stop?
• 25:41
  Speaker 1: Pretty I mean pretty much, there's because everything else is
• 25:44
  Speaker 1: just basically a matter of opinion at that point, there's
• 25:47
  Speaker 1: no there's no right answer to tell you the truth.
• 25:50
  Speaker 1: It's I think what's going to happen is a large
• 25:53
  Speaker 1: enough group will decide on what they consider the right answer,
• 25:57
  Speaker 1: and that that will be how things move forward. Yeah,
• 26:01
  Speaker 1: and it looks like the drum beat seems to be
• 26:03
  Speaker 1: pretty greed flation. He like people against greed flation.
• 26:07
  Speaker 2: Yeah, and that, like you said, that's a pretty catchy word.
• 26:09
  Speaker 2: There's an actual, like economics term. Like if you said, well,
• 26:14
  Speaker 2: you can probably get away with saying greed flation in
• 26:16
  Speaker 2: an ECON class these days, but.
• 26:17
  Speaker 1: Sure everybody will think you're really cool.
• 26:21
  Speaker 2: Previously, they say, look at the guy in the hat
• 26:23
  Speaker 2: walking in place saying things like greed flation.
• 26:26
  Speaker 1: Back at it.
• 26:28
  Speaker 2: The previous term for that was seller's inflation. There was
• 26:31
  Speaker 2: a guy in nineteen fifty eight named Abraham Lerner and
• 26:34
  Speaker 2: economists who he's a he's a Keensian guy. And we've
• 26:41
  Speaker 2: talked about the Keynsian approach to economics and what was
• 26:44
  Speaker 2: the other one?
• 26:45
  Speaker 1: It's another guy, Oh, Milton Friedman, the Chicago School guy.
• 26:52
  Speaker 2: No, I can't remember.
• 26:53
  Speaker 1: Adam Smith, Yeah, that was it, the classical the guy
• 26:57
  Speaker 1: who came up with capitalism.
• 26:59
  Speaker 2: Yeah. Yeah, those are sort of the general big two
• 27:02
  Speaker 2: schools of thought. And Keensians generally think that if there's
• 27:07
  Speaker 2: a lot of inflation going on, that means there's too
• 27:09
  Speaker 2: much money in the economy, and so the Fed comes in.
• 27:13
  Speaker 2: They operate on the Keynesian theories and they want to
• 27:16
  Speaker 2: slow that inflation, so they'll raise interest rates to kind
• 27:20
  Speaker 2: of cool things down and try and get people to
• 27:23
  Speaker 2: instead borrow and spend to kind of save a little money.
• 27:26
  Speaker 1: Yeah, and this actually can control inflation a lot, like
• 27:28
  Speaker 1: a lot. But what greedflation is showing us, and what
• 27:33
  Speaker 1: some economists who study this kind of thing, seller's inflation,
• 27:36
  Speaker 1: have known for a while that kind of monetary policy
• 27:40
  Speaker 1: can't control corporate decisions to increase prices.
• 27:45
  Speaker 2: In other words, seller inflation.
• 27:48
  Speaker 1: Right, So that's seller induced inflation, another word for greedflation.
• 27:51
  Speaker 1: It just is saying like, the companies who sell these
• 27:54
  Speaker 1: products are deciding they want to make more money than
• 27:56
  Speaker 1: they did before, and they're going to see if you're
• 27:58
  Speaker 1: willing to pay it. Here's the thing, and this is
• 28:01
  Speaker 1: why the pandemic changed everything. This is why the pandemic
• 28:04
  Speaker 1: takes these standard economic narratives and theories and just turns
• 28:10
  Speaker 1: them on their head in a lot of situations. And
• 28:12
  Speaker 1: the reason why is in a normal economy where companies
• 28:16
  Speaker 1: are competitive with one another, that urge to increase their
• 28:21
  Speaker 1: price and make more profit is kept down from the
• 28:24
  Speaker 1: concern that their competitor is going to keep their price
• 28:27
  Speaker 1: the same, and so people shoppers, being very price sensitive,
• 28:30
  Speaker 1: especially with food, will be like, oh, I'll eat this
• 28:34
  Speaker 1: generic wheat flakes rather than wheaties because it's a dollar less.
• 28:38
  Speaker 1: So I'm just going to become I'm just going to
• 28:40
  Speaker 1: go eat these from now on and just abandon wheaties.
• 28:43
  Speaker 1: They don't want that to happen, so they're really really
• 28:45
  Speaker 1: touchy about raising prices in a normally competitive economy. The
• 28:50
  Speaker 1: thing is the pandemic offered in a lot of people's
• 28:53
  Speaker 1: opinion including CEOs as we'll see, basically once in a
• 28:58
  Speaker 1: generation opportunity for everyone to raise their prices for no
• 29:03
  Speaker 1: good reason, essentially because they wanted to.
• 29:06
  Speaker 2: Yeah, I mean, there's a there's a sweet spot if
• 29:08
  Speaker 2: you're a company, you know, and you're making a box
• 29:12
  Speaker 2: of granola bars or whatever, where like you want to
• 29:14
  Speaker 2: have that price as much as it can be without
• 29:18
  Speaker 2: getting someone to not buy it, right, And that's just
• 29:21
  Speaker 2: sort of the sweet spot where they have maximized their
• 29:24
  Speaker 2: profit and anything beyond that might get them, like you said,
• 29:29
  Speaker 2: to look at another brand or maybe to not get
• 29:31
  Speaker 2: it at all, like to make that hard decision. So
• 29:34
  Speaker 2: they don't they don't fluctuate in their prices a lot.
• 29:36
  Speaker 2: They want to keep it kind of at that maximum
• 29:38
  Speaker 2: price where you're still going to buy it, but you
• 29:40
  Speaker 2: you know, like it what essentially is quote unquote fair
• 29:43
  Speaker 2: for everybody. But like you said, during the pandemic, and
• 29:47
  Speaker 2: I don't I don't think you know, I don't think
• 29:48
  Speaker 2: anyone is saying they these like five or six corporations,
• 29:51
  Speaker 2: like the evil heads of them all got together on
• 29:54
  Speaker 2: a call and said, on the count of three, we're
• 29:57
  Speaker 2: all going to raise our prices together. It just sort
• 30:01
  Speaker 2: of happened that way in that you know, there isn't
• 30:05
  Speaker 2: a lot of competition like when there's only a handful
• 30:08
  Speaker 2: of companies, So it's not like you had to have
• 30:10
  Speaker 2: some big, wide ranging conspiracy. You just had to basically
• 30:16
  Speaker 2: individually agree that this pandemic was a great cover to
• 30:20
  Speaker 2: raise prices that will never go back down.
• 30:22
  Speaker 1: Yeah, I think that you don't need collusion. Any CEO
• 30:26
  Speaker 1: worth their salary would see the pandemic as a great
• 30:30
  Speaker 1: opportunity to raise prices because there was really highly publicized
• 30:34
  Speaker 1: reasons for why prices would go up, like the supply
• 30:39
  Speaker 1: chain shortages, the war in Ukraine, energy prices going up.
• 30:43
  Speaker 1: They had this cover. The pandemic gave them cover to
• 30:47
  Speaker 1: raise their prices just because they wanted to. They didn't
• 30:49
  Speaker 1: need to say I'm going to do this. They knew
• 30:51
  Speaker 1: that everybody else is going to do this at the
• 30:52
  Speaker 1: same time, which provided additional cover. It decreased the risk
• 30:56
  Speaker 1: that they were going to lose market share. And then
• 30:59
  Speaker 1: the other thing that kind of came together to make
• 31:01
  Speaker 1: this a perfect storm of terribly high food prices is
• 31:05
  Speaker 1: something you touched on. Competition is less today than it was, say,
• 31:10
  Speaker 1: ten years ago. Fifteen years ago, twenty years ago, because
• 31:13
  Speaker 1: the Federal Trade Commission and the Justice Department have kind
• 31:17
  Speaker 1: of long been for several decades open for business. Like,
• 31:20
  Speaker 1: if you want to have a merger, they'll probably let
• 31:22
  Speaker 1: you do it, and you'll become a bigger corporation and
• 31:24
  Speaker 1: a bigger corporation and a bigger corporation, and as you grow,
• 31:27
  Speaker 1: you control more and more market share to where some
• 31:30
  Speaker 1: you know, today I think three main companies produce seventy
• 31:35
  Speaker 1: or eighty percent of the cereals on the shelves in
• 31:37
  Speaker 1: American grocery stores. That's not competition. That really lowers the
• 31:41
  Speaker 1: risk of losing market share because you control so many
• 31:44
  Speaker 1: different brands, you can monkey with them as much as
• 31:46
  Speaker 1: you want, so lower competition because of consolidation. Plus the
• 31:50
  Speaker 1: cover that the pandemic gave basically presented this perfect opportunity
• 31:55
  Speaker 1: for everybody to raise prices basically in unison, essentially just
• 31:59
  Speaker 1: to increase their profits. That's what we're seeing. And again,
• 32:03
  Speaker 1: I know I've been hammering this. We come to this
• 32:06
  Speaker 1: question again, is that a moral or is that just
• 32:09
  Speaker 1: normal capitalism?
• 32:11
  Speaker 2: Yeah, and again we're not saying cover profits because all
• 32:13
  Speaker 2: those reasons were real. We're not saying raising their costs
• 32:17
  Speaker 2: to so they wouldn't like start losing money. We're talking
• 32:21
  Speaker 2: about like the kind of increases that we saw, which
• 32:23
  Speaker 2: was fifty plus percent profit increase. If you are the
• 32:29
  Speaker 2: Groundwork Collaborative think tank, you can go over transcripts from
• 32:33
  Speaker 2: these corporate earnings calls from these companies and they're flat
• 32:39
  Speaker 2: out saying it, you know, like they're saying, basically, this
• 32:42
  Speaker 2: is our chance at a market reset, like an adjustment.
• 32:46
  Speaker 2: We thought our products were too inexpensive before, so this
• 32:50
  Speaker 2: is our chance to really raise these profits because we
• 32:53
  Speaker 2: have all this cover. One of the exec sit ConAgra
• 32:56
  Speaker 2: even said the consumers will welcome the increased prey, which
• 33:00
  Speaker 2: is I mean, if that's not just out of touch,
• 33:04
  Speaker 2: you know, I don't even know what to say about that.
• 33:07
  Speaker 2: People might accept it and live with it because it's
• 33:10
  Speaker 2: food they need, right, but no one's no one welcomes
• 33:12
  Speaker 2: a price increase on this something.
• 33:14
  Speaker 1: It was a really bizarre word to use, but this
• 33:16
  Speaker 1: was this was like these transcripts of CEOs talking to
• 33:20
  Speaker 1: their shareholders and major investors and then basically taking like
• 33:23
  Speaker 1: a victory lap, saying like look at this, this is nuts,
• 33:26
  Speaker 1: Like we're able to do this. We were able to
• 33:27
  Speaker 1: like make all these extra profits for nothing without without
• 33:30
  Speaker 1: our costs like increasing. We just raised our prices and
• 33:33
  Speaker 1: here's why. And you said something important. A lot of
• 33:36
  Speaker 1: the story that you hear from CEOs and corporations and
• 33:41
  Speaker 1: the people who typically defend them is that, like you said,
• 33:44
  Speaker 1: the prices were too low before, so this would this
• 33:47
  Speaker 1: gave them a chance to correct the market. And then
• 33:51
  Speaker 1: we us continuing to buy these products at the higher
• 33:54
  Speaker 1: price sends the signal to those companies like, Okay, this
• 33:58
  Speaker 1: is a fair price. Still like like, consumers are willing
• 34:01
  Speaker 1: to pay this, and well, they pay a little bit more,
• 34:04
  Speaker 1: let's find out, and they'll increase prices again. And then
• 34:07
  Speaker 1: eventually we get to a point where people are like,
• 34:08
  Speaker 1: I'm not paying anymore. Demand goes down, maybe the price
• 34:11
  Speaker 1: goes down or they hold it at that point.
• 34:14
  Speaker 2: Yeah, But and that goes back to the previous thing
• 34:16
  Speaker 2: we're saying, where people that are upper middle class and
• 34:19
  Speaker 2: higher can maybe complain about the cost of something, but
• 34:24
  Speaker 2: it doesn't change how they're necessarily buying groceries. The people
• 34:28
  Speaker 2: that are really getting pinched are the people at the bottom.
• 34:30
  Speaker 2: And that's We've just seen that happen all over, you know,
• 34:37
  Speaker 2: from gas costs to food costs. Like I remember when
• 34:41
  Speaker 2: gas I can't remember when it was. Veieler was in
• 34:44
  Speaker 2: like the late nineties or early two thousands, Yes, when
• 34:47
  Speaker 2: gas jumped like fifty or sixty cents over a year
• 34:50
  Speaker 2: or two. Yeah, And I remember telling my friends at
• 34:53
  Speaker 2: the time, like, it's never going to go back down
• 34:56
  Speaker 2: because over the previous maybe as long as there was gas,
• 34:59
  Speaker 2: but with the previous at least decade or so, it
• 35:02
  Speaker 2: fluctuated up and down like a nickel two three cents,
• 35:05
  Speaker 2: up maybe as high as a dime, then back down again.
• 35:08
  Speaker 2: And then it just it just ramped up like fifty cents.
• 35:11
  Speaker 2: And I just remember thinking I didn't even know why.
• 35:12
  Speaker 2: I knew nothing about it. I just remember thinking this
• 35:16
  Speaker 2: was what was it? Was it? Jeesu? Was it nine
• 35:20
  Speaker 2: to eleven? Maybe now before that, there was something that
• 35:23
  Speaker 2: happened and they took a huge jump, and I just
• 35:25
  Speaker 2: remember thinking, like, this is going to be the cover
• 35:28
  Speaker 2: and the gas will never be below like a buck
• 35:31
  Speaker 2: seventy five again or whatever it was.
• 35:33
  Speaker 1: Right, Yeah, And so that's a really cynical view, but
• 35:36
  Speaker 1: it's entirely possible. You're correct that.
• 35:38
  Speaker 2: It was correct.
• 35:39
  Speaker 1: Yeah, it They used an opportunity to raise prices and
• 35:44
  Speaker 1: maybe raise them beyond what they really needed to. And it,
• 35:48
  Speaker 1: sure it came down, It fluctuated up and down, but
• 35:50
  Speaker 1: it reset to a new normal, a new baseline.
• 35:53
  Speaker 2: Yeah, that's what I'm saying.
• 35:53
  Speaker 1: And it didn't really ever drop below that. And then
• 35:57
  Speaker 1: that new baseline gave them an opportunity later on to
• 36:00
  Speaker 1: ratcheted up to a new normal and so on and
• 36:02
  Speaker 1: so forth, and under normal conditions, that's just inflation, right,
• 36:06
  Speaker 1: Like the prices are supposed to grow over time. It's
• 36:11
  Speaker 1: like a sign of a healthy economy, but it needs
• 36:14
  Speaker 1: to be around two to three percent something like that.
• 36:16
  Speaker 1: What we're talking about is well beyond that. But that
• 36:20
  Speaker 1: does seem to be what we're seeing here too. And
• 36:23
  Speaker 1: at least one of the CEOs from their earnings call
• 36:27
  Speaker 1: said something like this is this is giving us a
• 36:30
  Speaker 1: chance to create this new normal, to normalize higher prices. Essentially,
• 36:34
  Speaker 1: people are going to get used to it. Sure we're
• 36:36
  Speaker 1: mad about it. Sure some people are being forced in poverty.
• 36:39
  Speaker 1: Now they'll get used to it. And the other terrible
• 36:43
  Speaker 1: thing about it, Chuck, is that they're driving inflation. They're
• 36:47
  Speaker 1: making it. They're making everything more expensive, like inflation is
• 36:52
  Speaker 1: outpacing its normal rate because of higher prices. Some economists
• 36:57
  Speaker 1: are like, nope, it's the other way around. But it
• 36:59
  Speaker 1: seems to be lopsided this time, where the higher prices
• 37:04
  Speaker 1: are causing higher inflation rather than higher inflation causing higher prices,
• 37:09
  Speaker 1: at least in the food world.
• 37:11
  Speaker 2: All right, let's take another break, then we'll talk about
• 37:14
  Speaker 2: more of this stuff right after this.
• 37:45
  Speaker 1: So thus far we've been leaving grocery stores kind of
• 37:50
  Speaker 1: out of the conversation and under normal circumstances that would
• 37:54
  Speaker 1: make sense.
• 37:54
  Speaker 2: Oh okay, I was wondering if we were gonna get
• 37:57
  Speaker 2: the grocery stores.
• 37:58
  Speaker 1: Right, because grocery stores, if I kind of a check
• 38:01
  Speaker 1: on food manufacturers, like the big chains and probably even
• 38:05
  Speaker 1: mid size chains, they have entire departments whose job it
• 38:09
  Speaker 1: is is to basically reconstruct all of the costs that
• 38:13
  Speaker 1: the food producers have to get a general idea of
• 38:17
  Speaker 1: how much they're marking up their product right. Because the
• 38:20
  Speaker 1: grocery stores don't want to pay any more than anybody else.
• 38:23
  Speaker 1: Because they're the ones whose stores we actually go to,
• 38:27
  Speaker 1: they have the most to lose. And then so normally
• 38:31
  Speaker 1: that ends up being like a check on how much
• 38:34
  Speaker 1: food companies mark up. Makes sense. The thing is, it
• 38:40
  Speaker 1: turns out that, at least according to the Federal Trade
• 38:42
  Speaker 1: Commission in the United States, grocery stores were profiteering from
• 38:46
  Speaker 1: the pandemic too.
• 38:48
  Speaker 2: Can you believe it?
• 38:49
  Speaker 1: Yeah. The FTC recently conducted a study of nine different
• 38:53
  Speaker 1: grocery stores and food wholesalers that includes Kroger, Amazon, and Walmart.
• 38:58
  Speaker 1: And they found that as an end street, they didn't
• 39:00
  Speaker 1: they weren't able to get like individual company data, but
• 39:03
  Speaker 1: they found that as an industry their profits went up
• 39:08
  Speaker 1: out of step with their costs.
• 39:10
  Speaker 2: Oh geez, here we go, just like.
• 39:12
  Speaker 1: The food producers, although it wasn't nearly as dramatic as
• 39:15
  Speaker 1: the food producers. For example, in twenty fifteen, the peak markup,
• 39:21
  Speaker 1: the peak profit was five point six percent across the industry,
• 39:26
  Speaker 1: and then in twenty twenty one it went over six percent,
• 39:30
  Speaker 1: and then two years later it hit over seven percent.
• 39:32
  Speaker 1: No boy, And again this is out of step with
• 39:34
  Speaker 1: their costs. And they also found that the large chains
• 39:40
  Speaker 1: used their clout to basically get their hands on scarce
• 39:45
  Speaker 1: products and edged out smaller competitors, so they basically created
• 39:49
  Speaker 1: mini monopolies in their areas in their regions, temporary mini monopolies.
• 39:54
  Speaker 1: So that's a thing too. For sure. We're getting gouged
• 39:58
  Speaker 1: both by the food companies and the grocery stores. It seems.
• 40:02
  Speaker 2: Yeah, I mean I can tell when I go to
• 40:04
  Speaker 2: the grocery store. It's a big difference.
• 40:06
  Speaker 1: Right.
• 40:07
  Speaker 2: One thing we should mention kind of quickly here is
• 40:09
  Speaker 2: this idea of shrink inflation, because that kind of figures in.
• 40:13
  Speaker 2: That's another sort of sneaky way to increase profits. That is,
• 40:17
  Speaker 2: when you pay the same price for less of something
• 40:20
  Speaker 2: that you used to get, whether it's you know, five
• 40:25
  Speaker 2: less dishwasher detergent inserts that come in the packet, or
• 40:32
  Speaker 2: whether it's ounces off of a chocolate bar or ounces
• 40:36
  Speaker 2: out of a coke bottle, the price is the same
• 40:39
  Speaker 2: and it's generally just like there's nothing illegal about it.
• 40:42
  Speaker 2: But it's like, oh boy, maybe they won't notice if
• 40:44
  Speaker 2: we make the two liter coke one point seventy five
• 40:48
  Speaker 2: leaders if we just keep the price the same, and
• 40:51
  Speaker 2: that's what happens.
• 40:52
  Speaker 1: Yeah, it's another form of inflation, even though the price
• 40:55
  Speaker 1: doesn't go up like the as a whole the unit price,
• 40:58
  Speaker 1: like to say, the per ounce price has gone up
• 41:01
  Speaker 1: because you get less for the same price, right right.
• 41:04
  Speaker 1: People who attrack inflation actually adjust for that because it's
• 41:08
  Speaker 1: so widespread. Shrink flation is. But one thing that's not
• 41:11
  Speaker 1: typically tracked is something related called skimpflation, where the ingredients
• 41:17
  Speaker 1: or the packaging or something degrades or downgrades to save money,
• 41:22
  Speaker 1: and that actually affects the price or the value or
• 41:25
  Speaker 1: the quality of what you're paying for. That's not tracked
• 41:29
  Speaker 1: as part of inflation. So there's still a way to
• 41:31
  Speaker 1: kind of wiggle through without making it seem like you're
• 41:33
  Speaker 1: ripping the customer off.
• 41:35
  Speaker 2: Yeah, so you mentioned other schools of thought. We're going
• 41:39
  Speaker 2: to talk about some of those, because there is no
• 41:41
  Speaker 2: arguing that during the pandemic that the prices just went
• 41:46
  Speaker 2: way way up, like that's just it's a fact. But
• 41:50
  Speaker 2: there are economists at the FED, the Federal Reserve Bank
• 41:53
  Speaker 2: of Kansas City that wrote a paper about these corporate
• 41:56
  Speaker 2: profits during the pandemic, and they started looking at the
• 41:59
  Speaker 2: dates and the timing of this stuff and they noticed
• 42:03
  Speaker 2: something interesting, which was that the biggest price hikes happening
• 42:08
  Speaker 2: in twenty twenty through about the first quarter of twenty
• 42:11
  Speaker 2: twenty one, and the inflation didn't get really bad until
• 42:15
  Speaker 2: later on in twenty twenty one and just devastatingly through
• 42:19
  Speaker 2: twenty twenty two. And so the Kansas City economists basically
• 42:23
  Speaker 2: said that they raise these prices early because they thought
• 42:27
  Speaker 2: they saw the future that higher costs were coming down
• 42:29
  Speaker 2: the line. So instead of waiting until that happened for
• 42:32
  Speaker 2: a big spike in prices, let's start raising these prices now.
• 42:36
  Speaker 2: It's kind of smooth things out over time.
• 42:38
  Speaker 1: Yeah, instead of one big increase, maybe five smaller increases
• 42:42
  Speaker 1: that equal that seem big increase, right, Yeah, and that
• 42:45
  Speaker 1: makes sense. That actually is pretty smart. I mean, like,
• 42:50
  Speaker 1: if you're a business, of course you want to predict
• 42:52
  Speaker 1: increases in cost. The thing is is the fact that
• 42:56
  Speaker 1: prices don't normally come back down. What we were talking
• 42:59
  Speaker 1: about with your anecdote about a gas going up. Yeah,
• 43:03
  Speaker 1: that when prices like of a certain type of item
• 43:06
  Speaker 1: or whatever go up but tend to not come back down.
• 43:10
  Speaker 1: Really that they're called sticky, or they're in economic terms,
• 43:14
  Speaker 1: those prices are downwardly rigid. They don't like to come down, right,
• 43:17
  Speaker 1: So as riggs, right, eggs are the miracle. So as
• 43:23
  Speaker 1: they're as companies like costs, their marginal costs to create
• 43:28
  Speaker 1: and deliver the product go down, those prices aren't going
• 43:31
  Speaker 1: to come down accordingly, so their profits are just going
• 43:34
  Speaker 1: to be nicer and nicer. That is an explanation that's
• 43:37
  Speaker 1: definitely more in step with the idea like this is
• 43:39
  Speaker 1: just normal capitalism. Like it happened to be a seller's
• 43:44
  Speaker 1: market during the pandemic because demand went up and companies
• 43:48
  Speaker 1: were there to fulfill that demand, and demand drove prices up,
• 43:51
  Speaker 1: and their costs didn't increase in steps, so they were
• 43:54
  Speaker 1: able to reap a higher profit. That's kind of like that.
• 43:57
  Speaker 1: That what that explanation is saying.
• 43:59
  Speaker 2: Yeah, for sure, there are people that are like, hey,
• 44:02
  Speaker 2: this greedflation thing, I don't agree with it. There's a
• 44:06
  Speaker 2: guy named Eric Levittz at New York Magazine who had
• 44:10
  Speaker 2: a very long piece critique basically on the greed plation
• 44:15
  Speaker 2: argument and said a bunch of things that we're going
• 44:17
  Speaker 2: to go over now. But the person was that, Hey,
• 44:20
  Speaker 2: these we've had corporate consolidation for a while now, and
• 44:24
  Speaker 2: they could have just raised these prices whenever. So I'm
• 44:28
  Speaker 2: not buying that this happened just during the pandemic. But
• 44:32
  Speaker 2: what we're and a lot of people, including Robert Reich,
• 44:35
  Speaker 2: who's a very smart guy, are pointing out it's like, no,
• 44:39
  Speaker 2: what they're saying is it gave him the cover to
• 44:40
  Speaker 2: do that, and they've sort of admitted this on the call.
• 44:44
  Speaker 2: So I just say throw that one out right away.
• 44:46
  Speaker 1: Yeah, it totally discounts the idea that brands try to
• 44:49
  Speaker 1: cultivate goodwill with their customers, that they just wouldn't care
• 44:53
  Speaker 1: that their customers didn't like them. TS, you're going to
• 44:56
  Speaker 1: buy our stuff anyway because we're consolidated. I agree to
• 44:59
  Speaker 1: throw that one.
• 44:59
  Speaker 2: Out all right. The next one was, and this is
• 45:02
  Speaker 2: kind of what you were talking about, but that fifty
• 45:04
  Speaker 2: four nearly fifty four percent increase in corporate profits. He
• 45:10
  Speaker 2: argues that it's it's the effect of inflation, not the cause,
• 45:16
  Speaker 2: and that we've got it backwards. Josh and Chuck have
• 45:19
  Speaker 2: it backwards right exactly.
• 45:20
  Speaker 1: That the companies were there to offer the products at
• 45:24
  Speaker 1: the higher price and they just happened to make this
• 45:26
  Speaker 1: windfall and that's just it was in their favor, right,
• 45:30
  Speaker 1: I mean, it's a it's a legitimate explanation it's just again,
• 45:35
  Speaker 1: it skirts that issue of whether that's okay.
• 45:38
  Speaker 2: I guess yeah.
• 45:40
  Speaker 1: And then the other thing that Levits eventually settles on
• 45:43
  Speaker 1: is he's like all that stuff that people say, that
• 45:47
  Speaker 1: pandemic narrative for higher prices, all that's correct. Demand was high,
• 45:52
  Speaker 1: supply was tight, people had way more money than they
• 45:56
  Speaker 1: normally do. All of a sudden, Uncle Joe Biden sent
• 45:58
  Speaker 1: a bunch of checks and that corporations have always been greedy,
• 46:04
  Speaker 1: and that I take this to basically say, like, if
• 46:08
  Speaker 1: you don't if you don't like what you're seeing, if
• 46:11
  Speaker 1: you don't like being price gouged for food during a pandemic,
• 46:15
  Speaker 1: then don't live through a pandemic in a capitalist country. Sorry, right,
• 46:21
  Speaker 1: you know.
• 46:22
  Speaker 2: Sure that's pretty inconvenient for a lot of people, exactly.
• 46:26
  Speaker 1: Yeah, And a lot of people are saying, like, no,
• 46:28
  Speaker 1: we've got to do something about this. There's a Society
• 46:31
  Speaker 1: general banker economist named Albert Edward or Edwin, I can't
• 46:37
  Speaker 1: remember Edwards, I think, and he said that what he's seeing.
• 46:41
  Speaker 1: This is the guy who said he's been at this
• 46:43
  Speaker 1: for forty years and he's never seen anything like it.
• 46:45
  Speaker 1: He said that it's unprecedented and astonishing levels of corporate
• 46:50
  Speaker 1: greed that we're seeing as a result of these price
• 46:53
  Speaker 1: increases in these profit margins that we're seeing are eye popping.
• 46:57
  Speaker 1: This guy's an economist student for forty years. He's like,
• 46:59
  Speaker 1: this is just wrong. And he threw out something that
• 47:03
  Speaker 1: a lot of people on both sides of the political
• 47:06
  Speaker 1: spectrum do not like to hear. He said, we should
• 47:09
  Speaker 1: consider price controls, Like if corporations are going to go this,
• 47:12
  Speaker 1: be this reckless with people's lives and you know, budgets,
• 47:17
  Speaker 1: then we need to control them. The government needs to
• 47:19
  Speaker 1: step in and say you can't charge over this amount
• 47:22
  Speaker 1: for this product.
• 47:23
  Speaker 2: Yeah, And I mean they're even like super capitalist Keynsian
• 47:29
  Speaker 2: economists who agree about Parch part of that, which is like, hey,
• 47:34
  Speaker 2: if there's a like a real bottleneck of a commodity
• 47:37
  Speaker 2: that only a handful of people control, you should cap
• 47:42
  Speaker 2: that commodity price so they don't get together and gouge
• 47:46
  Speaker 2: people when there's a real squeeze on like a particular
• 47:50
  Speaker 2: specific thing, right, not not like an overall like cap
• 47:55
  Speaker 2: on the price of cereal or something.
• 47:57
  Speaker 1: So the thing is is that there's there's plenty of
• 47:59
  Speaker 1: story worries of horror stories from the past where capitalist
• 48:03
  Speaker 1: economies have tried to use price controls and that they
• 48:07
  Speaker 1: can lead to scarcity because suppliers would be like, I'm
• 48:10
  Speaker 1: not going to get into this business any longer. I'm
• 48:12
  Speaker 1: getting out of it because I can't make more than
• 48:15
  Speaker 1: what the government's saying I can make. And all of
• 48:16
  Speaker 1: a sudden, that product, say bread, is now really hard
• 48:20
  Speaker 1: to come by because nobody's making it, and demand spikes
• 48:23
  Speaker 1: and people have to stay in line. No one likes
• 48:25
  Speaker 1: price controls, but there's not there's not a lot of
• 48:30
  Speaker 1: alternative ideas, Like there's a sense of helplessness and everybody
• 48:35
  Speaker 1: who tends to rely on the federal government to solve
• 48:37
  Speaker 1: like major massive problems like food suppliers gouging customers. You
• 48:45
  Speaker 1: got basically either price controls or to me, the more legitimate,
• 48:50
  Speaker 1: the more legitimate answer, which would be to tax those
• 48:55
  Speaker 1: windfall profits at a higher rate. Like Okay, if you're
• 48:58
  Speaker 1: just doing like the normal capitalist thing as a corporation
• 49:02
  Speaker 1: and you you can't help it, that's just what your
• 49:05
  Speaker 1: profits are. If it's a during a pandemic or during
• 49:08
  Speaker 1: a crisis, or people are really hurting and you're making
• 49:11
  Speaker 1: these profits we're going to tax above you know, X
• 49:14
  Speaker 1: percentage higher than everything below that is your profit.
• 49:19
  Speaker 2: Now is that trigger? Is that like U during a
• 49:22
  Speaker 2: specific time or is it like a specific like a
• 49:28
  Speaker 2: percentage increase in profits triggers it or both?
• 49:31
  Speaker 1: I think both. I think if you have a situation
• 49:34
  Speaker 1: where normal competition is being is just kind of like
• 49:38
  Speaker 1: gone haywire for some reason, say like the pandemic, then
• 49:41
  Speaker 1: it would probably kick in because windfall profits are a
• 49:43
  Speaker 1: real possibility. And then say anything over you know, a
• 49:49
  Speaker 1: twenty percent increase in profits is going to get taxed
• 49:52
  Speaker 1: at ninety percent or something like that, Like, yeah, you
• 49:54
  Speaker 1: can make the profits, but we're going to take away
• 49:56
  Speaker 1: more of it because we got to help out these
• 49:57
  Speaker 1: people who are hurting. While your benefit, we need to
• 50:00
  Speaker 1: keep things a little more even then these guys are benefiting,
• 50:04
  Speaker 1: these guys are starving, which is the current narrative.
• 50:08
  Speaker 2: What you're forgetting, though, Josh, is when corporations have these
• 50:11
  Speaker 2: huge windfalls of profits, they pass that along to their
• 50:14
  Speaker 2: employees by raising their wages and to the consumer eventually too. Right, Sure,
• 50:19
  Speaker 2: sure isn't that How isn't that how it works? Yeah?
• 50:21
  Speaker 1: They drop their prices, right.
• 50:23
  Speaker 2: They just don't keep that for themselves, right.
• 50:25
  Speaker 1: No, not at all. Well, that's the problem, Like, that's
• 50:28
  Speaker 1: where a lot of people are like, Okay, we need
• 50:29
  Speaker 1: to figure out just even the basic structure of corporations.
• 50:32
  Speaker 1: If the point of a corporation is to maximize profits
• 50:36
  Speaker 1: for shareholders at all costs, at the expense of the economy,
• 50:40
  Speaker 1: at the expense of people's lives, health, well being, there's
• 50:44
  Speaker 1: something inherently broken about that, and we need to fix that.
• 50:48
  Speaker 1: And if you ask me, I don't think there's anything
• 50:50
  Speaker 1: inherently problematic about capitalism. I think people who who don't
• 50:56
  Speaker 1: care enough about other people or the planet or something
• 50:59
  Speaker 1: like that been allowed to come to power over the years,
• 51:01
  Speaker 1: and they're the ones who seem to represent capitalism more
• 51:04
  Speaker 1: than others. But I don't think that's necessarily like a
• 51:07
  Speaker 1: pure capitalist format. I think it can be much more
• 51:13
  Speaker 1: accommodating of the planet and of other people without reverting
• 51:16
  Speaker 1: to socialism or communism or anything like that. You can
• 51:18
  Speaker 1: still have capitalist a capitalist economy, but why can't you
• 51:23
  Speaker 1: also be like, you're making way too much money and
• 51:26
  Speaker 1: people are starving because of all this money you're making.
• 51:29
  Speaker 1: We need to help these people out with some of
• 51:30
  Speaker 1: that money, so we're going to tax it. It just
• 51:32
  Speaker 1: makes sense to me. I understand that a lot of
• 51:35
  Speaker 1: people revile that, and I'm not trying to shove my
• 51:37
  Speaker 1: opinion down anyone's throat. It just that particular answer makes
• 51:42
  Speaker 1: sense to me because this does seem like just such
• 51:45
  Speaker 1: a haywire weird situation.
• 51:48
  Speaker 2: Yeah, and this is especially sort of triggering for humans
• 51:53
  Speaker 2: because it's food. We're not talking about, you know, luxury
• 51:58
  Speaker 2: items or you know, other weird kinds of inflation that
• 52:02
  Speaker 2: I mean, this is something that people literally need to
• 52:05
  Speaker 2: live everywhere.
• 52:08
  Speaker 1: Right, you know, like recreational pontoons aren't what you're talking about,
• 52:12
  Speaker 1: you know, like it's really important stuff for sure. Yeah,
• 52:17
  Speaker 1: I agree. I think that that makes it a different
• 52:18
  Speaker 1: a different conversation than if we were talking about a
• 52:21
  Speaker 1: different commodity or different.
• 52:22
  Speaker 2: I mean, it seems like it. But geez, I'm sure
• 52:25
  Speaker 2: we'll hear from people that say that we don't know
• 52:28
  Speaker 2: what we're talking about.
• 52:29
  Speaker 1: And oh man, we're going to get some ugly emails
• 52:32
  Speaker 1: from people. It's fine, we can do it.
• 52:34
  Speaker 2: Those people don't complain about the cost of food.
• 52:37
  Speaker 1: I'm sure right, you have a right to your opinion.
• 52:40
  Speaker 1: You know, we have a right to our opinion too,
• 52:41
  Speaker 1: so don't get mad. You can share your opinion with us,
• 52:44
  Speaker 1: but don't get mad at us for sharing ours.
• 52:46
  Speaker 2: Yeah. We're just people. Yeah, we don't have some We
• 52:50
  Speaker 2: never took some oath of neutrality right to be podcasters.
• 52:55
  Speaker 2: I think people think that sometimes.
• 52:57
  Speaker 1: Right, Yeah, for sure, we're just a couple of regular dudes,
• 53:00
  Speaker 1: one of whom is wearing an awesome hat.
• 53:02
  Speaker 2: Right now, walking in place.
• 53:05
  Speaker 1: Weirdly, you got anything else? No, Well, go forth everybody
• 53:09
  Speaker 1: and decide is greedflation an evil thing? Or is it
• 53:13
  Speaker 1: just normal or what? And if you have other solutions
• 53:16
  Speaker 1: to the idea or the problem, then I would love
• 53:19
  Speaker 1: to hear those, said Tom. And in the meantime, I say, Chuck,
• 53:22
  Speaker 1: it's time for a listener maw.
• 53:24
  Speaker 2: All right, Hey, guys, just want to say thanks for
• 53:26
  Speaker 2: keeping me entertained since the pandemic. I've been the office
• 53:30
  Speaker 2: random facts guy. I'm already that guy.
• 53:34
  Speaker 1: This guy sends random facts to people.
• 53:36
  Speaker 2: No, no, no facts, gotcha. Yeah, that'd be funny though. It's
• 53:41
  Speaker 2: a good bit. People to just hear that sound, that
• 53:45
  Speaker 2: fact sound, and they're like, God, Gary's at it. I'm sorry,
• 53:48
  Speaker 2: it's Daniel, I'm already that guy when it comes to
• 53:51
  Speaker 2: a lot of the things I treat, but now it's
• 53:54
  Speaker 2: about all things. Because of long rides to Ohio to
• 53:57
  Speaker 2: see the family. My toddlers even asked for stuff, you know,
• 54:01
  Speaker 2: specifically the fire truck episode that's cute makes sense, which
• 54:05
  Speaker 2: can be tough to find since I'm currently working backwards
• 54:08
  Speaker 2: from newest to oldest. I even just found out that
• 54:11
  Speaker 2: Josh and I are.
• 54:11
  Speaker 1: Birthday buddies, so oh hey, happy birthday.
• 54:14
  Speaker 2: That's right, he says. And not cancers anymore. Did they change?
• 54:17
  Speaker 2: Did they change that?
• 54:18
  Speaker 1: I don't think so well, I'm to look into it.
• 54:22
  Speaker 1: I have felt a little different in the last couple
• 54:23
  Speaker 1: of years.
• 54:24
  Speaker 2: All right, Thank you all again for the hours of enjoyment,
• 54:27
  Speaker 2: laughs and learning. If you do end up reading this,
• 54:29
  Speaker 2: would you shout out my wife Lynn, who has become
• 54:32
  Speaker 2: a fan. So that is from Daniel Klein and Lynn
• 54:36
  Speaker 2: and their kids.
• 54:37
  Speaker 1: Nice. Thanks a lot, Daniel, thank you for indoctrinating your
• 54:41
  Speaker 1: children into stuff you should know. Universe.
• 54:44
  Speaker 2: That's right, and they're also listening now to Biblical time machine.
• 54:47
  Speaker 2: Okay from Dave Ruse.
• 54:50
  Speaker 1: Is it biblical or is it Bible time machine?
• 54:53
  Speaker 2: Daniel says biblical and I'm not sure and we're not
• 54:56
  Speaker 2: going to look it.
• 54:56
  Speaker 1: Up right either way. It's a top notch Dave Ruse
• 54:59
  Speaker 1: podc And by the way, Dave Ruth's helped us with
• 55:02
  Speaker 1: this episode too, so that's very appropriate. Double Dave yep again,
• 55:06
  Speaker 1: Thank you, Daniel, and if you want to be like
• 55:08
  Speaker 1: Daniel and get in touch with us, you can send
• 55:10
  Speaker 1: us an email to Stuff Podcasts at iHeartRadio dot com.
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  Speaker 1: Stuff you Should Know is a production of iHeartRadio.
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  Speaker 2: For more podcasts my heart Radio, visit the iHeartRadio app,
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  Speaker 2: Apple Podcasts, or wherever you listen to your favorite shows.