Words to Ponder – Fighting Inflation

Thursday morning, I listened to a news report on The Daily Podcast about the state of the economy nationally, as well as globally. Part of the information shared was the decision by OPEC on Wednesday to lower oil production by 2 million barrels a day. That will certainly drive up gasoline prices, which had already started rising here even before the decision was made.

That instant hike at the pump is so typical of the way the gasoline companies operate; they raise prices well in advance of any shortage of oil. Why? So they can make more money.

According to the news report on The Daily, the long-term effect of that decision by OPEC could possibly be a global recession. The fact that member countries don’t seem to care about that speaks volumes about the self-absorption and greed that drives so much of the world’s economy.

It is also interesting to note that what the Fed is doing here in the U.S. is also having a negative impact on the global economy. The October 7th episode of the Ezra Klein podcast features an interview with, who talks about the ripple effect what one country does has on another.

After listening to these podcasts, I decided to dig a little deeper into the issue of inflation, and found some interesting information.

Financial reports from ExxonMobil show that revenue is up 68.9% Net income is up 280.6% Second quarter reports show earnings in the second quarter of 2022 were $11.4 billion compared to $4.5 billion in the first quarter.

Certainly, if the company cared a whit about how their greed affects us all, and how it drives inflation, the powers that be in the corporate offices would reconsider raising prices. But no, they all make such high salaries, they can absorb the higher cost of consumer goods that we’ve been dealing with for almost two years now. And the costs are sure to rise.

Likewise, this focus on increasing profits over serving consumer needs during the two years of the pandemic contributed to the rise in inflation. Many companies, especially car companies, were showing record profits, while more people who live below middle class, struggled to keep up with rising prices.

It was a surprise to see how the prices of used cars and new cars continually went up, due to higher demand and lower supply, which is a normal part of how the economy works. Unfortunately, that practice of raising prices was another driving force in higher inflation rates, and when supply increased to come closer to satisfying consumer demand, the car companies didn’t lower prices. In fact, they are on track to hit $50,000 for a new car in coming months.

And just to be clear, what’s happening here in the United States with rising prices and inflation is not the fault of President Biden. Let’s stop turning every social problem into another opportunity to point fingers and shift blame.

The two factors that drove inflation higher and higher in recent years are:

Supply. When the supply chain was broken and goods were limited the price of those that were available rose. That’s the way economic factors work. But now the supply chain has been fixed for the most part and more goods are available. Still, some companies producing the goods are not lowering prices of leveling off the price hikes.

Consumer spending. There are some things like food and clothes and other daily necessities that we simply have to buy. No getting around that. But what about luxury spending? If folks really want to see inflation come down, or at least slow down without going into a full recession, what if two things happened?

Corporations would cut profit margins just a bit for the next 6 months.

We could curtail our shopping habits just a bit for the next 6 months.

We have historically been a country that has pulled together to end a crisis, and the inflation spiral is a real crisis. Let’s grab the rope.