Hey there,
The last year or so I keep hearing the term ‘Greedflation’ pop up more and more. The Idea here is that there are greedy capitalists that are raising the prices on goods and services faster than their own costs are increasing and this is causing prices to rise.
Now if I think about it inflation is always based on some price increasing, and sometimes because there is some shock that limits how mch of something is available. Oil is scarce because of some natural disasters or war, food is scarce because of drought, etc.
Most of the time there are other sources of the same resources (different crops), or the resource was horded before (‘strategic’ oil reserves), in both cases someone is able to charge more (eg Profit) from the situation.
So now it sound to me that normal inflation and greedflation are both simply based on one entity in the supply chain increasing the price to take advantage of the situation. Whether you call it greedflation or not depends on whether your personal “in” group is profiting from or or not.
Where is my thinking error here? Is greedflation a real thing?
Inflation is the devaluation of the currency. The definition has been muddied for a time now but ultimately inflation refers to the expansion of the money supply.
As people/corporations borrow more and governments print more, prices increase. Not because those items have more value but because the money has lost its value needing more of it to pay for the same stuff.
If tomorrow everyone’s wages would double. Prices would double as demand would increase and the market balances itself out.
Greedflation is a term that shifts that narrative. You could argue that yes there are bad actors for sure. But the term greedflation is redefining inflation, making you focus more on corporations raising prices instead of the main contributor, an expanding money supply.
A quibble only because it’s what I do professionally, but that’s not really how people other than macroeconomists concerned with the money supply talk about inflation. It’s usually used as shorthand for the price change for a given standard of living. The importance of that matters quite a lot when you start talking about relative inflation between goods and services. We can very clearly say that textbooks have had massive price inflation in the last 20 years, and that has nothing to do with the money supply, it’s because they are way more expensive than they used to be relative to other goods. Another reason it matters is comparison across regions. If prices are rising faster in Asheville, NC than NYC because it’s a metro transitioning from being cheap to kind of expensive, it doesn’t make good economic sense to say that currency is being devalued at a faster rate in NC. What is actually happening is that prices are rising faster there, again, relative to the rate of change somewhere else.
I guess it depends on how you define inflation. To me inflation is the ratio between goods and services and the money supply. Inflation isn’t rising prices. Price rising is a symptom of inflation. I just don’t think it’s beneficial to use inflation interchangeably with supply and demand and price rises, it just creates confusion. I very much favor the macroeconomics view of inflation because through that lens a lot things start making sense.
Since this is your field, obviously you’d know that if you have more goods, you get deflation. And funnily enough when you look up the definition of deflation it’s very strongly tied to that ratio between goods and services and the money supply.
I just feel that over time people have changed the definition of inflation. It’s no surprise that the term Greedflation has popped up because the topic surrounding it has been convoluted, confusing a lot of people.