News analysis: Most media miss forest for the trees on inflation

 News coverage of rising prices isn’t exactly Chicken Little stoking widespread panic, but most misses the causes and consequences while deferring to partisan finger-pointing.

Inflation doesn’t happen in a vacuum; it’s not an inevitable result if some natural force, like gravity.

Customers understandably squawk, and retailers blame wholesalers, who blame distributors who blame manufacturers…

But in an unfettered “free market,” regular consumers’ option is to stop shopping, a difficult choice when the product is natural gas for winter heating bills or food.

Consumer prices rose in 2021 by 7%, the largest 1-year gain since 1982. However, that’s not high by historical levels, which shows that 11%-13% weren’t uncommon inflation rates. Also, the biggest increases – housing, health care, higher education – have increased substantially for decades with little outcry from conservatives (except for election years). 

A few questions remain unanswered by most media: What’s behind inflation? How high will it go (and how long)? What can be done, and by whom? (See below.)

During the pandemic, business bailouts, stimulus aid, Paycheck Protections, enhanced and extended jobless benefits, etc., all meant more money in people’s pockets or bank accounts, so spending followed, and businesses were unprepared, so too many dollars pursued too few goods.

Reality check: The Bureau of Labor Statistics says half of inflation is due to cars and energy, and half from furnishings, housing and appliances. So people protecting themselves from COVID were suddenly shopping for washers and dryers, couches and trucks?

Inflation isn’t some economic self-correction to pent-up demand. Scarcity can create an opportunity for management greed under the cover of helplessness amid powerful financial forces.

Sure, corporations’ first duty is to maximize profits, not to be good corporate citizens, but that can damage the economy, too. Nevertheless, some wring their hands and cite a lack of semiconductors – used in vehicles and many consumer products – for rising prices.

No: computer chips are inanimate objects. Some person or department or board of directors decided to boost prices.

Others point to the increasingly exaggerated supply bottleneck and profitable shipping companies. (See “Blame game” below.)

Some price hikes go way beyond increases in wages or production costs, implicitly indicating some businesses are just taking advantage of the media attention.

“The biggest culprit for rising prices that’s not being talked about is the increasing economic concentration of the American economy in the hands of a relative few giant big corporations with the power to raise prices,” said Robert Reich, one-time labor Secretary and author of Saving Capitalism: For the Many, Not the Few.

Last year, Exxon Mobil and Chevron profits bounced back in a major way due to oil’s rising prices. They passed along higher costs to consumers and benefited enormously: Chevron reported a $15.6 billion profit; Exxon reported a $23 billion profit. They weren’t outliers.

Meanwhile, there are still too many Americans without jobs – millions more unemployed than before COVID hit – and consumer confidence remains healthy, according to the Conference Board. Its index was 111.9 in November, 115.8 in December, and 113.8 last month. Plus, the U.S. economy grew by 6.9% in 2021, the biggest one-year jump since 1984, rebounding in the pandemic’s second year in spite of two COVID variants that shook the country.

 “We live in this sort of funhouse-type economy where we can see stock markets breaking records, corporate debt markets breaking records, while the middle class is really treading water with stagnant wages and falling further behind,” says Christopher Leonard, author of The Lords of Easy Money: How the Federal Reserve Broke the American Economy.

Some media imply the Federal Reserve, the country’s central bank, will be the savior. But it does one main thing: create currency, “expanding or contracting the supply of money,” Leonard continues. “When the Fed creates new dollars, it doesn’t create them in the checking account of normal people. It creates new dollars on Wall Street in the bank accounts of 24 select institutions… the folks you’d suspect: JPMorgan, Goldman Sachs, Wells Fargo.”

Perhaps reflecting frustration at having little influence on business, two-thirds of U.S. voters disapprove of President Biden’s handling of inflation, according to ABC News-Ipsos polling – as if the nation’s chief executives alone have ever had the economic levers to pull or magic incantation to say, “Inflation, be gone!”

Leonard adds that there are actually two kinds of inflation anyway: price inflation and asset inflation. Price is obvious; what’s less recognized – but promoted by the manipulative Fed for years – is inflation of assets, the increase in value of homes, stocks and corporate bonds.

“We’ve actually had runaway asset inflation for a decade,” he says, and “the Federal Reserve is responsible for the price inflation, at least to a certain degree, by pumping all of this money into the economy.”