Greedflation Is Real | STUFF YOU SHOULD KNOW

[Music]. welcome to stuff you should know a. production of iHeart. [Music]. Radio hey and welcome to the podcast I'm. Josh and there's Chuck and Jerry's here. somewhere and this is stuff you should. know um the timely topical Edition we. haven't done one of these in a while CH. yeah fight the power Edition I guess so. kind of seems that way doesn't it like. there's really.

very few ways to discuss this and not. kind of come out on that side yeah I'm. I'm kind of glad you picked this one. because um with all the talk of you know. Food grocery store prices and stuff in. the back of my mind I've been thinking. like all right I know there were some. reasons for this but I also wonder if. they just raised prices a lot because. they could right and that's kind of what. happened yeah it sure seems that way. like um I think kind of at the end of.

the day the discussion over what we're. talking about which is called greed. flation which is a fairly new catchy. term right yeah. um the idea isn't that food companies. made massive profits over the last few. years starting in the pandemic right. like there's just basically no way you. can argue that that didn't happen it's. been documented the issue at hand is. whether that constitutes something. beyond the norm.

of capitalism or is that just that's. what happens in a free market when. there's you know weirdness to it you. know sure that's the that's the question. in my mind what it really comes down to. is your interpretation of whether. there's I don't know maybe some sort of. basic moral responsibility for certain. kinds of companies or companies that. deal in certain kinds of goods to not. just make as much money as they possibly. can I don't know I think that's the. that's the actual debate over it now let.

me ask you this is it possible to be a. person who. says you know I'm a th% behind. capitalism and let it run a muuk and. that's just let it work itself out and. then also complain about food prices. like can those things coexist yes those. people are called the. worst okay so can coexists they're just. I think so people you don't want to hang. out with right exactly okay yeah I think. verly too you can be totally Pro.

capitalist and still be like the idea. that it's just business is kind of aoral. I don't I don't think you have to you. have to pick one side or the other I. think that it's a little grayer than. that all right shall we jump in yeah. let's so ultimately what we're talking. about are increases in prices at the. grocery store on levels that we just. haven't seen before like you're not. crazy the prices at the grocery store. are Bonkers um apparently in 2020 2 in.

America the um inflation for food at. grocery stores increased. 11.4% then in 2023 it added another 5%. and that was you know half a little a. little more than half of what the. increase had been in 2022 but it was. still double what the normal annual. increas is of uh 2.5% that's how much. food typically inflates year over-year. at the grocery store instead in 2 years. it inflated by almost 177% wow yeah and.

there were reasons for this like there's. a standard narrative which is there's. just a handful of reasons that everybody. points to like this is why yeah and. there's you know we're going to talk I. guess a little bit about kind of the the. standard explanations that we've been. hearing for the past couple of years. which we're not saying is you know bunk. or anything like that um CU as you'll. see I think it's a pretty evenhanded. episode we might get a hot hot under the. collar.

but I think there's reason to be so um. here we go so uh one thing you will hear. and have heard a lot is uh you know the. pandemic's obviously a big reason for. all this um the biggest driver of it and. the disruptions to the supply chain. whether you were building a house or. whether you were uh a food company. marking up your goods the supply chain. squeezed out it seems like every. everything on the planet and there were. food items shortages there were.

ingredient shortages and that was one of. the drivers for inflation yeah even. packaging shortages like a good example. is that caffeine-free Coke was. temporarily discontinued because there. was a shortage of aluminum which meant. that coke had to basically ration their. cans and regular Coke sells more than. caffeine-free Coke so they they just. basically focused on coke for a little. while like that caused a shortage it was. just that bizarre and Meandering in some. cases right yeah but which had nothing.

to do with raising prices but that's. just a a side note no right it's true. yes you're right so people ate at home a. lot more during the pandemic obviously. so there was more demand you know these. goods were in shorter Supply and all of. a sudden there's more demand for fewer. of those goods and that is just. inflation 101 as far as how things get. out of control right and then so if you. are a processed food company you have to. use. ingredients um and a lot of ingredient s.

were scarcer and the cost of the. ingredients went up right so that means. that they raised their cost because they. raised the prices of their products. because their costs increased so their. marginal cost which is the cost to put. everything together and deliver it and. all that stuff package it um increased. which means they increased their markup. their profit which means you put those. two together the price increases in e in. unnecessary clui economic terms yeah and. we're going to talk more in depth about.

this stuff obviously but you know. usually if there's like if it's you know. if it's not a pandemic and there just. happens to be an ingredient that is. getting squeezed and so the cost of. making a a bag of Cheetos or something. costs more they're not going to. companies aren going to be like oh we. got to raise a price then they'll just. sort of absorb that to keep the prices. kind of steady and keep things flowing. uh that that wasn't the case during the. pandemic though no and Chuck that is. that is a key thing to understand is the. what we are see those markups the.

difference in the the price and the cost. of the companies uh pay to actually. produce the product that like that. that's it's we've just never seen. anything like this before economists are. like I've never seen anything like this. before in my 40 Years of of studying you. know food delivery and food supply chain. stuff yeah and then people said you've. been studying there for 40 years and the. guy's like yes someone please let me. stop.

exactly uh and then another thing that. we heard here and there was um you know. people got stimulus checks a lot of. people did um when unemployment was just. so um staggering during the pandemic so. the government you know issued these. checks uh people had a little more money. in their pocket to spend uh which was. the idea and demand increased and so. that pushed prices higher the thing is. though Europe experienced the same. inflation uh we did sometimes even worse.

as far as food costs go and they didn't. get stimulus checks so that one is a. little um I don't know confusing I guess. is the easiest way to say it it is but. just based on classic economic theory. there there's just no way it didn't have. some impact you know what I mean yeah. sure in a way you can also point to it. as being a very um unusual factor that. took place within the context of a. larger unusual period which was the. pandemic right you also had um other.

things going on at the same time like. the pandemic wasn't enough there were. tons of bouts of Aven flu that was. killing hens left and right um and I. guess fryer roter the kind you eat to. those chickens sure um so there was less. chicken to go around and less hens to. lay eggs which meant the price of eggs. and poultry would increase um what's. interesting about that is that as more. hens were hatched and started laying.

more eggs and the supply came back the. price of eggs went down and that has is. weird in the context of what's been. going on lately too yeah absolutely and. we'll talk about eggs more because. believe it or not eggs are a big story. yeah H story uh and then of course the. thing we heard a lot about was the war. in Ukraine that was another uh sort of. coexisting situation alongside the. pandemic which disrupted wheat exports. uh you you know when when you're a.

European country the United States and. you squeeze sanctions onto Russia. they're going to squeeze right back and. say well we've got oil that we're not. going to supply you anymore and that's. just going that squeezes everything and. all of a sudden grain exports uh. especially wheat went up which affects. the cost of a lot of foods yeah because. the the global economy is so. interconnected that like if if Europe is. paying higher energy prices that's. definitely going to affect the price of. the things that American companies are.

importing from Europe right yeah so all. those things put together added up to. that um unprecedented increase in prices. in the grocery store all right so those. are a lot of the reasons that we've been. uh hearing about you know over the past. few years but as far as like what this. actually looks like in a grocery store. uh I thought you know we thought it'd be. helpful if we break down just what this. looks like for just a person walking in. a grocery store okay so I'll be that. person walking I've got a hat on just. imagine I have a cool hat on okay I'm.

walking into the groc I don't know if. I've ever seen you wear a hat weirdly. though like I look weird right now well. it's cuz you're wearing a hat and I'm. walking in place but. weirdly uh I think I've seen you walk in. place but I've never seen you wear a hat. so if you talk to the USDA they will say. the price of food uh in the United. States was 25% higher uh this last year. in 2023 than it was in 2019 what uh and. that was higher than every other. category on the Planet except for.

transportation and that's why people are. probably like you should also do one a. why Airline why it costs you know. $11,000 to fly from Atlanta to York New. York now does it really no that's not. true but just airline tickets are. ridiculous now yeah do you remember when. you used to like get on a plane and to. be like a third full and they'd still. take off they didn't cancel it yeah. which that's no good like let's fill the. planes up for sure but I mean like but. now it's just Cutthroat it's like the.

oppos it's like oh you paid for your. ticket a month ago TS you're off the. flight yeah yeah and the expense uh. anyway all that to say that food price. food prices Rose over that three-year. period or fouryear period more than any. other category except for. Transportation uh and I believe you. already talked about the food increase. mhm uh percentage wise but if you're in. a grocery store Sir with a hat weirdly. walking in place why don't you start. coming. forward okay here I come take off your.

hat when you enter like a good gentleman. um no I'm going to leave the Hat on okay. sure it's a really cool hat all right. and you might notice that that loaf of. bread over there just that white. sandwich bread is 22% more expensive. than it was just two years ago good and. sir I see you're thinking like well. forget that I'm going to bake my own. bread well good luck with that too. because that allpurpose flour is 21%. more expensive and butter is 31% more. expensive so don't even think about.

baking a birthday cake I can't even get. a break on butter can't even I know. butter is I mean I eat that stuff right. off the stick so so okay I'm still the. guy in the Hat I'm moving down another. aisle I'm like nuts to making my own. bread I'll just eat a bunch of ultra. processed stuff because that's Dirt. Cheap everybody knows that surely that. hasn't increased in price no no you up. and since you said nuts why don't you go. ahead and get some of those nuts because. they're about 16% more more expensive.

well they make me pack on too much. weight anyway so I'm fine with that and. by the way sir with the hat I want to. remind you that these stats for uh. processed foods are just over one year. wow from 2022 to 2023 you're paying 16%. more for the salties 16% more for those. cookies 18 and a half% more for that. granola bar you think is healthy and if. you want a little fruit snack almost 24%. more expensive not the fruit snacks yes. the fruit snacks Chuck this skit has.

gotten really. dark as dark as Halloween pretty pretty. dark um no actually no you're right. Halloween was a blood bath especially if. you're talking funsize Snickers cuz get. this this is crazy I mean even Halloween. normally Halloween prices are Beyond. nuts but this is just really bad a bag. of funsize Snickers mhm went from um. 2022 or sorry went from 2021 to 2022 to. it increased by 140% you could have.

gotten a bag of funsize Snickers for. five bucks in 2021 you paid $12 the next. year all right well there there's. nothing fun about that okay so the SKS. over and scene um or end scene depending. on your view and I'm going to keep. wearing my hat though okay all right. keep that hat on that's a good setup and. we'll be right back with. more.

[Music]. [Music]. okay so um there's something to remember. too like it sucks to pay a lot at the. grocery store but if you are um a.

low-income family or a low-income. country it hits you even worse because. food prices increases in food prices are. regressive they have the largest impact. on the people who have the least amount. of money because those people spend a. far greater proportion of their. household budget or their National. Budget on food than wealthier people do. they just have less money so they still. need food it's not something that you. can skip very easily and eventually.

you're going to have to eat um so it's a. it's an essential thing to buy and you. don't really have much of a say in it um. if the food prices keep Rising so it's. really important to keep that in mind. that um it's not just an annoyance it's. not just a dent in your pocketbook it. actually has pushed people into um. poverty classes in different countries. in developed countries um because food. prices got they were kind of close on. the border to begin with and then. pandemic came along and as the food.

prices increased they were pushed into. um poverty categories yeah if you look. at the food price index uh the five. categories uh meat Dairy cereals. vegetable oils and sugar increased. 57% all over the world over a 2-year. period from 2020 to. 2022 and then uh a couple years later. here in. 2024 some prices have come down uh some. quite a bit uh egg especially and again. we'll talk about eggs a little more.

they're they're ones that uh really kind. of reset back down again right um but. not everything and and just over a. two-year period a 57% increase in meat. Dairy cereals vegetable oil and sugar is. going to have a real impact on like you. said on on families in the United States. that don't have as much money and. certainly uh hundreds of millions of. people all over the world in countries. that didn't have so much money to begin. with right so that's that's one side of.

it like this is actually affecting and. impacting people in very Extreme Ways. yeah um so on on the one hand you have. people who are being pushed into poverty. on the other hand you have the food. producers who are benefiting. tremendously like in again in like. record degrees in some cases you mean. these hundreds and hundreds of uh. corporations that own all these food. companies right no Chuck do you have F. five fingers and five toes on each hand. and foot still yes well then you can.

more than count the number of. conglomerates essentially running the. food supply in the developed world yeah. I mean we were being kind of cheeky. there but that that's we've talked about. this before the fact that there are just. a handful of huge corporations that own. almost every food uh and you know this. is obviously discounting the the Little. Indie Brands and stuff like that they're. out there doing their thing most of. those are trying to get bought by one of. these companies yeah yeah I was going to. say more and more they're they're a.

portfolio of one of these larger Brands. yeah looking for that you know big big. money exit and you know good for them. but point is there are uh just a handful. of these big corporations and if you ask. if you sit down any of their CEOs and. grilled them over this cost increase. they're going to talk about those things. we talked about at the beginning they're. going be the pandemic inflation uh was. out of control and there wasn't anything. we could do we were forced to raise our. prices to remain profit able and we're. not saying that uh you shouldn't make a.

profit or anything like that like we get. it that these are for-profit companies. and those costs definitely did go up and. they maybe could not take that all on. the chin uh we're not arguing for that. but if they then raised those costs and. said all right well we have to account. for this to so we don't lose our profit. margins and they accounted for that then. their profit margin should have been. about the same and they should have been. like all right we didn't lose a lot of. money we stayed about the same because.

we accounted for those costs but that's. not what happened yeah their profits. didn't raise didn't increase in step. with their costs they increased plus. some right plus a lot right plus a lot. so Tyson Foods a huge producer of. chicken um in the United States uh in. the first quarter of 2021 to the first. quarter of 2022 they doubled their. profits not their revenue their profits. doubled okay 100% times two doubled yeah.

that's important and that's one year. year over year Cargill another huge. conglomerate um they had a record $ 6.68. billion profit in 2022 double its profit. two years before yeah I I mean overall. food. corporations uh had their largest. profits during the pandemic during Peak. inflation when everyone was getting. squeezed and hurt the most Food. Corporation recorded their largest.

profits in 70 years right um and some of. them even did while they were losing. sales like General Mills sales were. declining um by like 9% in 2021 and. another 4% in 2022 and yet at the end of. 20222 their profits were up. 97% um over the 2021 I believe so here's. where the sticking point is Chuck this. is where where views diverge because. this this is document fact is that is.

that just to be expected like do people. who are mad about this greed flation. idea not understand basic capitalism um. or do they have a point in saying like. this this is approaching and probably. has past. immorality yeah I mean that's a question. if you look we're talking about. corporations but if you look at people. uh there were 62 new new food. billionaires uh over that 2 years span. from 2020 to.

2022 and they calculated this is Oxfam. who calculated this stuff that the food. billionaires which that those two words. is interesting together food billionaire. yeah uh those food billionaires made. more money during the two years of the. pandemic than they did in the previous. 23 years. combined that's I mean that's the stat. of the show so economists like have. started to dig into this and just like. about anything else there's liberal. economists is conservative Economist and.

depending on where you fall you probably. either agree like yes this is greed. inflation or you're like no people don't. understand this is just basic. capitalism yeah uh we can look at actual. numbers though to help people make up. their own mind there's a nonpartisan. group called uh economic uh the economic. policy Institute that we talked about. before on the show and they looked at. factors that contributed to these higher. prices over the last few years and they. identified three major components of. costs for a category um goods and.

services which food was a part of uh. which are unit labor costs which are you. know the the workers what you pay a. worker their salary their benefits stuff. like that uh the non-labor cost uh. energy cost Transportation uh debt. payments tax I imagine for the food part. like the actual food stuff is in there. right sure yeah uh and then profit. margin which is that markup that we. talked about uh that you know that's. what's going to generate the profit for. the company and so they looked since.

2020 and prices in the uh nonfinancial. corporate sector which like we said. Foods a part of that group um have. increased 6 point uh 6.1% a year on. average which is three times the. prepandemic rate of 1.8 a year right. okay so they said in like under normal. normal circumstances all these costs are. actually pretty well represented in a. steady way um across the non-financial.

corporate sector like inflation. increases you can attribute increases in. price which is inflation to those three. things um un labor non-labor and profit. um you can divide them up pretty pretty. clearly um normally the largest. contributor to price increases are labor. costs in a normal economy they um. contribute about 62%. to inflation the non-labor cost which is.

like you said the cost that to actually. make the product and deliver it and all. that stuff that's about 27% and normally. The Profit represents about 11.4. 115% and you put all those things. together and that explains the increase. in prices year-over-year which we call. inflation right yeah and that by the way. was over a 40y year period yeah so. that's yes exactly that's what I'm. saying like it's pretty stable or it has. been stable over the last 40 years where.

it became totally unhinged from normaly. is starting in the pandemic it's. starting about Q2 of 2020 um where. everything just kind of went haywire. basically according to that normal. 40-year um Trend yeah so labor cost. which over that 40 years previously. accounted for about. 62% of increase in cost accounted for. less than 8% that this time right uh the.

non- labor cost previously uh if you. remember was. 27% uh that is now. 38% so that's that that's that Narrative. of like the supply chains and like. Ukraine and all that stuff that's what. that cost that increasing cost. represents yeah and then the you know. what's coming everybody uh that. 11.4% over 40 years of you know of the. markup of the corporate profit that. accounted for an increase in prices went. to almost.

54% isn't that nuts I mean there it is. yeah so it's about five times the normal. rate during a. pandemic food companies made about five. times what they normally make in profits. on food yeah but the the end can we. stop pretty I mean pretty much um. there's because everything else is just. basically a matter of opinion at that. point um there's no there's no right. answer to tell you the truth it's I. think what's going to happen is a large.

enough group will decide on what they. consider the right answer and that that. will be how things move forward yeah and. it looks like the drum beat seems to be. pretty greed flation like people against. greed flation yeah and that like you. said that's a pretty catchy word There's. an actual uh like e economics term like. if you said well you can probably get. away with saying greed flation in an. econ class these days but sure everybody. will think you're really cool previous. viously they say look at the guy in the.

Hat walking in place saying things like. greed flation I'm back at it uh the. previous term for that was sellers. inflation uh there was a guy in 1958. named Abraham larner an. economist uh who um he's a a keian guy. and we've talked about the keian. approach to economics and what was the. other one it's another. guy uh oh Milton Freedman The Chicago. School guy. no I can't remember Adam Smith yeah that.

was it the classical the guy who came up. with capitalism yeah yeah so those those. are sort of the general big two schools. of thought and Kian generally think that. uh if if there's a lot of inflation. going on that means there's too much. money in the economy and so the FED. comes in they operate on the kenian. theories and they want to slow that. inflation so they'll uh raise interest. rates to kind of cool things down and. try and get people to instead borrow and.

spend to kind of save a little money. yeah and this actually can control. inflation a lot like a lot um but what. greed inflation is showing us and what. some economists who study this kind of. thing sellers inflation have known for a. while um it that kind of monetary policy. can't control corporate decisions to. increase prices in other words seller. inflation right so that's seller induced. inflation another word for greed. infation it just is saying like the the.

companies who sell these products are. deciding they want to make more money. than they did before and they're going. to see if you're willing to pay it. here's the thing and this is why the. pandemic changed everything this is why. the pandemic um takes these standard. economic narratives and theories and. just just turns them on their head in a. lot of situations and the reason why is. in a normal economy where where. companies are competitive with one. another the that urge to to increase. their price and make more profit is kept.

down from uh the concern that their. competitor is going to keep their price. the same and so people Shoppers being. very price sensitive especially with. food will be like oh I'll um eat this. this generic wheat flakes rather than. weedies because it's a dollar less so. I'm just going to become I'm just going. to go eat these from now on and just. abandon weedies they don't want that to. happen so they're really really touchy. about raising prices in a normally. competitive economy the thing is the. pmic offered in a lot of people's.

opinion including CEOs as we'll see um a. basically once in a generation. opportunity for everyone to raise their. prices for no good reason essentially. because they wanted to yeah I mean. there's a there's a sweet spot if you're. a company you know and you're making a a. box of granola bars or whatever where. like you want to have that price as much. as it can be without getting someone to. not buy it right uh and that's just sort. of the sweet spot where they have.

maximized their profit and um anything. beyond that might get them to like you. said to look at another brand or maybe. to not get it at all like to make that. hard decision so they don't they don't. fluctuate in their prices a lot they. want to keep it kind of at that maximum. price where you're still going to buy it. but you you know like it what. essentially is quote unquote fair for. everybody but like you said during the. pandemic and I don't I don't think you. know I don't think anyone is saying they. these like five or six Corp operations. like the the evil heads of them all got.

together on a call no and said on the. count of three we're all going to raise. our prices together uh it just sort of. happened that way uh in that you know. there isn't a lot of competition like. when there's only a handful of companies. so it's not like you had to have some. big wide- ranging conspiracy you just. had to. basically uh individually agree that. this pandemic was a great cover to raise. that will never go back down yeah I.

think that you don't need collusion any. CEO worth their salary would see the. pandemic as a great opportunity to raise. prices because there was really highly. publicized reasons for why why prices. would go up like the supply chain. shortages the war in Ukraine Energy. prices going up they had this cover the. pandemic gave them cover to raise their. prices just because they wanted to they. didn't need to say I'm going to do this. they knew that everybody else is going. to do this at the same time which.

provided additional cover it it. decreased the risk that they were going. to lose market share and then the other. thing that kind of came together to make. this a perfect storm of terribly High. food prices um is something you touched. on competition is less today than it was. say 10 years ago 15 years ago 20 years. ago because the the Federal Trade. Commission and the justice department. have kind of long been for several. decades open for business like if you. want to have a merger. they'll probably let you do it and.

you'll become a bigger Corporation and a. bigger Corporation and a bigger. Corporation and as you grow you control. more and more market share to where some. you know today I think three main. companies uh produce 70 or 80% of the. cereals on the shelves in American. grocery stores that's not competition. that really lowers the risk of losing. market share because you control so many. different brands you can monkey with. them as much as you want so lower. competition because of consolidation. plus the cover that pandemic gave um.

basically presented this perfect. opportunity for everybody to raise. prices basically in unison essentially. just to increase their profits that's. what we're seeing and again I know I've. been hammering this we come to this this. this question again is that aoral or is. that just normal capitalism yeah and. again we're not saying cover profits. because all those reasons Were Real uh. we're not saying raising their their. cost to uh so they wouldn't like start. losing money we're talking about like. the kind of increases that we saw which.

was 50 plus% uh profit increase um if. you are the groundwork collaborative. Think Tank you can go over transcripts. from these uh corporate earnings calls. from these companies and they're they're. flat out saying it you know like they're. saying basically this is this is our. chance at a market reset like an. adjustment right uh we thought our. products were too uh inexpensive before. so this is our chance to really raise. these profits because we have all this.

cover uh one of the execs at ConAgra. even said the consumers will welcome The. increased price which is I mean if. that's not just out of touch you know. like I don't even know what to say about. that people might accept it and live. with it because it's food they need. right but no one's no one welcomes a. price increase on something no it was a. really bizarre word to use but this was. this was like these transcripts of CEOs. talking to their shareholders and major. investors and then basically taking like.

a Victory lap saying like look at this. this is nuts like we're able to do this. we were able to like make all these. extra profits for nothing without. without our costs like increasing we. just raised our prices and here's why. and you said something important a lot. of the story that you hear from um CEOs. and corporations and the people who. typically defend them is that like you. said the prices were too low before so. this would this gave them a chance to. correct the market and then we us. continuing to buy these products at the.

higher price sends the signal to those. companies like okay this is a fair price. still like like consumers are willing to. to pay this and uh will they pay a. little bit more let's find out and. they'll increase prices again and then. eventually we get to a point where. people are like I'm not paying anymore. demand goes down maybe the price goes. down or they hold it at that point yeah. but and that goes back to the previous. thing we're were saying where people. that are upper middle class and higher. can. maybe complain about the cost of.

something but it doesn't change how. they're necessarily buying groceries the. people that are really getting pinched. are the people at the bottom and that's. um that we've just seen it happen all. all over you know from uh gas cost to to. food cost like I remember when gas I. can't remember when it was I feel like. it was in like the late 90s or early. 2000s yes when gas jumped like 50 or 60. cents over a year or two yeah and I. remember telling my friends at the time.

like it's never going to go back down CU. over the. previous maybe as long as there was gas. but over the previous at least decade or. so it it fluctuated up and down like a. nickel two three cents up maybe as high. as a dime then back down again and then. it just it just ramped up like 50 cents. and I just remember thinking I didn't. even know why I knew nothing about it I. just remember thinking this was and and. what was it was it uh jeez was it 9911. Maybe no before that there was something.

that happened and they took a huge jump. and I just remember thinking like this. is going to be the cover and the gas. will never be below like a buck 75 again. or whatever it was right yeah and so. that's a really cynical view but it's. entirely possible you're correct that it. was correct yeah yeah that it it they. they used an opportunity to raise prices. and maybe raise them beyond what they. really needed to and it sure it came. down it fluctuated up and down but it. reset to a new normal a new Baseline.

reset I'm it didn't really ever jop. below that and then that new Baseline. gave them an opportunity later on to. ratchet it up to a new normal and so on. and so forth and under normal conditions. that's just inflation right like like. like the prices are supposed to grow. over time it's like a sign of a healthy. economy but it needs to be around 23%. something like that what we're talking. about is is well beyond that but that. does seem to be. what we're seeing here too and and at.

least one of the CEOs from their um. earnings call said something like this. is this is giving us a chance to create. this new normal to normalize higher. prices essentially people are going to. get used to it sure we're mad about it. sure some people are being forced into. poverty now they'll get used to it and. this the other terrible thing about it. Chuck is that they're driving. inflation they're making it they're. making everything more expensive like. like inflation is outpacing its normal.

rate because of higher prices some. economists are like nope it's the other. way around but it seems to be. lopsided this time where the higher. prices are causing higher inflation. rather than higher inflation causing. higher prices at least in the food world. all right let's take another break uh. and we'll talk about more of this stuff. right after. this. [Music].

[Music]. so um thus far we've been leaving. grocery stores kind of out of the. conversation and under normal. circumstances that would make sense oh.

okay I was wondering if we were going to. get to grocery stores right because. grocery stores provide kind of a check. on food manufacturers like the big. chains and probably even midsize chains. they have entire departments whose job. it is is to basically. reconstruct all of the costs that the. food producers have to get a general. idea of how much they're marking up. their product right because because the. grocery stores don't want to pay any. more than anybody else because they're.

the ones whose stores we actually go to. they have the most to lose yeah um and. then so normally that ends up being like. a check on how much food companies mark. up make sense uhhuh the thing is it. turns out that at least according to the. Federal Trade Commission in the United. States grocery stores were profiteering. from the pandemic too God can you. believe it yeah the f C recently. conducted a study of nine different.

grocery stores and food wholesalers that. includes Kroger Amazon and Walmart and. they found that as an industry they. didn't they weren't able to get like. individual company data but they found. that as an industry their profits went. up uh out of step with their costs oh. jeez here we go um just like the food. producers although it wasn't nearly as. dramatic as the food producers um for. example in 2015 the peak markup the peak. profit was 5.6% across the industry and.

then in 2021 it went over 6% and then. two years later it hit over 7% oh boy. and again this is out of step with their. costs uh and they also found that the. large chains um used their clout to. basically get their hands on scarce. products and edged out smaller. competitors so they basically created. mini Monopoly. in their areas in their regions. temporary mini monopolies so that's a.

thing too for sure we're getting gouged. both by the food companies and the. grocery stores it seems yeah I mean I. can tell when I go to the grocery store. it's a big difference right uh one thing. we should mention kind of quickly here. is this idea of shrink flation uh. because that kind of figures in that's. another sort of sneaky way to increase. profits uh that is when you pay the same. price for Less of something that you. used to get uh whether it's you know uh.

five less uh dishwasher uh detergent. inserts that come in the packet or. whether it's uh ounces off of a. chocolate bar or ounces out of a coke. bottle uh the price is the same and it's. generally just like there's nothing. illegal about it but it's like oh boy. maybe they won't notice if we make the. uh the the 2 L Coke 1.75 L if we just. keep the price the same and that's what. happens yeah it's another form of.

inflation even though the price doesn't. go up the like the as a whole the unit. price like to say the per ounce price. has gone up because you get less for the. same price right right people who track. inflation actually adjust for that. because it's so widespread shrink. flation is but one thing that's not. typically tracked is is something. related called skimp flation where the. ingredients or the packaging or. something degrades or downgrades to save. money um and that actually affects the.

the price or the value or the quality of. what you're paying for um that's not. tracked as part of inflation so there's. still a way to kind of Wiggle through. without making it seem like you're. ripping the customer off yeah so you. mentioned other schools of thought uh. we're going to talk about some of those. um because there is no arguing that the. during the pandemic that the the prices. just went way way up like that's that's. just it's a fact uh but there Economist. at the FED uh the Federal Reserve Bank.

of Kansas City uh that wrote a paper. about these corporate profits during the. pandemic and they started looking at the. dates and the timing of this stuff and. they noticed something interesting which. was that the biggest price hikes. happening in 2020 uh through about the. first quarter of. 2021 and really the inflation didn't get. really bad until later on in 2021 and. just devastatingly through 2022 and so. the Kansas City Economist basically said.

that they raised these prices early. because they thought they saw the future. that higher costs were coming down the. line so instead of waiting until that. happened for a big spike in prices let's. start raising these prices now to kind. of smooth things out over time yeah. instead of one big increase maybe five. smaller increases that equal that same. big increase right yeah and that makes. sense um that that actually is pretty. smart I mean like if you're a business. of course you want to predict increases. in cost um the thing is is the fact that.

prices don't normally come back down. what we were talking about with your. anecdote about like gas going up yeah. that when prices uh uh like of a certain. type of item or whatever go up but tend. to not come back down really that. they're called sticky or they're in. economic terms those prices are. downwardly rigid they don't like to come. down right so EX for eggs right eggs are. the miracle um so as the as company's um.

like costs their marginal cost to create. and deliver the product go down those. prices aren't going to come down. accordingly so their profits are just. going to be nicer and nicer um that is. an explanation that's definitely more in. step with the idea like this is just. normal capitalism like it it happened to. be a seller's market at during the. pandemic because demand went up and. companies were there to fulfill that. demand and demand drove prices up and. their costs didn't increase in steps so.

they were able to reap a higher profit. that's kind of like that that what that. explanation is saying yeah for sure um. there are people that are like hey this. greed flation thing uh I don't agree. with it there's a guy named Eric uh. Levitz at New York Magazine who had a a. very long piece uh critique basically on. the greed inflation argument and said a. bunch of things that we're going to go. over now but the first one was that hey. these uh for we've had corporate. consolidation for a while now and they.

could have just raised these prices. whenever so I'm not buying that this. happened just during the pandemic um but. what we're and a lot of people including. uh Robert Reich who's a very smart guy. uh are pointing out it's like no what. they're saying is they gave him the. cover to do that and they've sort of. admitted this on the call so I I just. say throw that one out right away yeah. it totally discounts the idea that. Brands um try to at Goodwill with their. customers that that they just wouldn't.

care that their customers didn't like. them TS you're going to buy our stuff. anyway because we're Consolidated I. agree let's throw that one out all right. the next one was uh and this is kind of. what you were talking about but that 54%. nearly 54% increase in corporate. profits uh he argues that it it's not. it's the it's the effect of inflation. not the cause and that we've got it. backwards Josh and Chuck have it. backwards right exactly that the the. companies were there to offer the.

products at the higher price and they. just happened to make this windfall and. that's just it was in their favor right. I I mean it's it's a it's a legitimate. um explanation it's just again it it. skirts that issue of whether that's okay. I guess yeah and then um the other thing. that L eventually settles on is he's. like all that stuff that people say um. that pandemic narrative for higher. prices all that correct demand was high. Supply was tight um people had way more.

money than they normally do all of a. sudden Uncle Joe Biden sent him a bunch. of checks um and that corporations have. always been greedy and that the I take. this to basically say like if you don't. if you don't like what you're seeing if. you don't like being price gouged for. food during a pandemic then don't live. through a pandemic in a capitalist. country sorry right. you know sure that is pretty.

inconvenient for a lot of people but. exactly yeah and a lot of people are. saying like no we' we've got to do. something about this there's a um a. society General Banker uh Economist um. named Albert Edward or Edwin I can't. remember uh Edwards I think and he said. that what he's seeing this is the guy. who said he's been at this for 40 years. and he's never seen anything like it he. said that um it's unprecedented and. astonishing level of corporate greed. that we're seeing as as a result of.

these price increases in these profit. margins that we're seeing are eye. popping this guy's an economist doing it. for 40 years he's like this is just. wrong and he threw out something that a. lot of people on both sides of the. political Spectrum do not like to hear. he he said we should consider price. controls like if corporations are going. to go this be this Reckless with. people's lives and you know budgets then. we need to control them the government. needs to step in and say you can't. charge over this amount for this.

product yeah and I mean there are even. uh like super capitalist keian Economist. who agree about part part of that which. is like hey if there's a like a real. bottleneck to a commodity that only a. handful of people control uh you you. should cap that commodity price so they. don't get together and gouge people uh. when there's a real squeeze on a on a. particular specific thing right not not.

like an overall like cap on the price of. cereal or something so the thing is is. that there's there's plenty of stories. of horror stories from the past where. where capitalist economies have tried to. use price controls and that they can. lead to scarcity because suppliers will. be like I'm not going to get into this. business any longer I'm getting out of. it because I can't make more than what. the government's saying I can make and. all of a sudden that product say bread. is now really hard to come by because. nobody's making it and demand spikes and.

people have to stay in line no one likes. price controls um but there's not. there's not a lot of alternative ideas. like what there's this sense of. helplessness and everybody who tends to. rely on the federal government to solve. like major massive problems like Food. suppliers gouging customers um you got. basically either price controls or to me. the more um leg legitimate ex the more. legitimate answer which would be to tax.

those windfall profits at a higher rate. like okay if you're just doing like the. normal capitalist thing as a corporation. um and you you can't help it that's just. what your profits are if it's say during. a pandemic or during a crisis where. people are really hurting and you're. making these profits we're going to tax. above you know X percentage higher than. everything below that is your. profit now is that trigger is that like. uh during a specific time or is it like.

a a specific like percentage increase in. profits triggers it or both I think both. I think if you have a situation where. normal competition is being is just kind. of like gone Haywire for some reason say. like the pandemic then it would probably. kick in because windfall profits are a. real possibility and then say anything. over um you know a 20% increase in. profits is going to get taxed at 90% or.

something like that like yeah you can. make the profits but we're going to take. way more of it because we got to help. out these people who are hurting while. you're benefiting we need to keep things. a little more even then these guys are. benefiting these guys are starving which. is the current narrative what you're. forgetting though Josh is when. corporations have these huge windfalls. of profits uh they pass that along to. their employees by raising their wages. and to the consumer eventually too right. sure sure is isn't that how isn't that. how it works yeah they drop their prices.

right that's just they just don't keep. that for themselves right no not at all. well that's the problem like that's. where a lot of people are like okay we. need to figure out just even the basic. structure of Corporations if the point. of a corporation is to maximize profits. for shareholders at all costs at the. expense of the economy at the expense of. people's lives Health. well-being there's something inherently. broken about that and we need to fix. that and if you ask me I don't think. there's anything inherently problematic. about capitalism I think people.

who who don't care enough about other. people or the planet or something like. that have been allowed to come to power. over the years and they're the ones who. seem to represent capitalism more than. others but I don't I don't think that's. necessarily like a pure capitalist um. format I think it can be much more. accommodating of the planet and of other. people without reverting to Socialism or. communism or anything like that you can. still have cap. um a capitalist economy but why can't. you also be like you're you're making.

way too much money and people are. starving because of all this money. you're making we need to help these. people out with some of that money so. we're going to tax it it just makes. sense to me I understand that a lot of. people revile that and I'm not trying to. shove my opinion down anyone's throat it. just that particular answer makes sense. to me because this does seem like just. such a Haywire weird situation yeah and. this is espe especially uh sort of. triggering for humans because it's food.

we're not talking about you know luxury. items or you know other weird kinds of. inflation that I mean this something. that people literally need to live right. everywhere right you know like. recreational pontoons aren't what we're. talking about you know like it's really. important stuff for sure yeah I agree I. think that that makes it a different a. different coners ation than if we were. talking about a different commodity or. different I mean it seems like it but.

gez I'm sure we'll hear from people that. say that we we don't know what we're. talking about and oh man we're going to. get some ugly emails from people it's. fine we can deal with but those people. don't complain about the cost of food. I'm sure right you have a right to your. opinion you know we have a right to our. opinion too so don't get mad you can. share your opinion with us but don't get. mad at us for sharing ours yeah we're. just people yeah we don't have some uh. we never took some oath of uh neutrality.

right to be to be podcasters I think. people think that sometimes right yeah. for sure we're just a couple of regular. dudes one of whom is wearing an awesome. hat right. now walking in place weirdly uh you got. anything else no well go forth everybody. and decide is greed flation an evil. thing or is it just normal or what and. if you have other solutions to the idea. or the problem then I would love to hear. that those send and in the meantime I. say Chuck it's time for listener.

mail all right hey guys just want to say. thanks for keeping me entertained uh. since the pandemic I've been the office. random facts guy I'm already that guy. when it comes this guy sends random. faxes to people no no no F A CS gotcha. yeah that'd be funny though that's a. good. bit people just hear that sound that. fact sound and they're like oh God. Gary's at it not again I'm sorry it's. Daniel uh I'm already that guy when it. comes to a lot of the things I uh treat.

but now it's about all things uh because. of long rides to Ohio to see the family. my toddlers even asked for stuff you. should know uh specifically the. firetruck episode that's cute makes. sense uh which can be tough to find. since I'm currently working backwards. from newest to oldest I even just found. out that Josh and I are birthday buddies. oh hey happy birthday that's right he. says and not cancers anymore did they. change did they change that I don't. think so. I'll have to look into it I have felt a. little different in the last couple.

years all right uh thank you all again. for the hours of enjoyment laughs and. learning if you do end up reading this. would you shout out my wife Lyn who's. become a fan so that is from Daniel. kleene and uh Lynn and their kids nice. thanks a lot Daniel thank you for. indoctrinating your children into stuff. you should know universe that's right. and they're also listening now to. biblical time machine okay uh from uh. Dave bru. is it biblical or is it Bible time. machine uh Daniel says biblical and I'm.

not sure and we're not going to look it. up right now either way it's a top-notch. Dave R podcast and by the way Dave rues. helped us with this episode too so. that's very appropriate double Dave yep. uh again thank you Daniel and if you. want to be like Daniel and get in touch. with us uh you can send us an email to. stuff podcast at iHeart. [Music]. radio.com stuff you should know is a. production of iHeart radio for more. podcasts iHeart Radio visit the iHeart.

Radio app Apple podcasts or wherever you. listen to your favorite. [Music]. shows.