It might be comforting to think that the rising price inflation is caused by corporate greed. However, when senior politicians, including the president of the US himself advance such nonsense due to political desperation and economic illiteracy, citizens are entitled to an official apology.
Consumer price inflation is a bit like communism, in that it is a problem that we eliminated in the 1980s after decades of struggle. The problem with both is that enough time has passed for us to be saddled with politically influential people who experienced neither. These neophytes are free to propagate false claims about inflation and communism without lying, since they don’t know better.
Yet, that isn’t what’s going on with either Senator Elizabeth Warren, who was an academic and practicing lawyer during the 1970s and 80s, or President Joe Biden, who was already a US senator during the same period. Both are keenly aware of what causes price inflation due to firsthand experience. They are also surrounded by a coterie of highly knowledgeable advisors that can remind them lest they forget.
Consequently, when Senator Warren tweeted that the cause of rising poultry prices during Thanksgiving is corporate greed, and when President Biden blamed “potentially illegal and anti-competitive behavior” for rising gas prices, we can safely assume that both are being actively deceptive.
Sadly, for those who had high hopes for the return of more ethical behavior from the US’ political leadership after the 2016-2020 interregnum, these remarks serve to confirm how cynically politicians are willing to behave as they cling to power by their fingernails.
After finally passing their infrastructure bill, the Democrats were looking forward to a clear path for the implementation of their agenda. Unfortunately for them, as they were busy squabbling internally over the bill’s content, their popularity was tanking, and Republicans are on course to make large and politically disruptive gains in the 2022 mid-term elections.
An important contributor has also been the Achilles heel of all American presidents – rising gasoline prices, and so in their desperation, senior Democrats are now willing to actively deceive the general public.
The cause of current inflation is much more mundane than the oligarchic conspiracy that Biden and Warren would have you believe. It is rooted in the fact that as people are finally willing to spend and travel more, supply is not able to keep up, due to a variety of coincidental disruptions.
Seven years of depressed oil prices caused oil and gas investment to crater, and expanding capacity takes several years. Disruptions to supply chains and the physical transporting of goods – especially intermediate goods that are inputs into finished goods – have led to large delays in the manufacturing of some products.
An important example of this has been semi-conductor chips production, which has been unable to keep up with rapidly growing demand. Finally, labor shortages have also disrupted production as people are wary of reentering the workforce post-pandemic.
Note how all the above explanations are transient, which is consistent with the nature of the current bout of inflation. In contrast, corporate greed has been consistently high throughout the last three centuries at least. Blaming rising gasoline prices on corporate greed today is as idiotic as attributing falling gasoline prices during 2020 to corporate altruism.
An added reason for Biden’s frustration is that he has miscalculated in his foreign policy, and he appears to be a man who does not like to admit his mistakes.
During the botched evacuation from Afghanistan, Biden erroneously did far too little preparation over seven months in office but was indignant when journalists tried to hold him accountable. In energy markets, Biden has also exhibited poor statecraft, and so to divert attention away from his miscalculations, he has decided to be economical with the truth.
The US’ strategic relationship with Saudi Arabia was always based on the Kingdom maintaining an excess supply of oil that it could bring online to prevent oil price spikes, especially ones coming at a politically inconvenient time such as a mid-term election.
This happened during the Iraqi invasion of Kuwait, when Saudi Arabia compensated for Kuwaiti supply disruptions.
During the last 10 years, the value of such a service has declined due to the emergence of shale oil, and due to the politically led transition away from fossil fuels. Biden actively sought domestic political gains by distancing the US from Saudi Arabia, thereby surrendering the ability to solicit helpful production increases from the Kingdom.
During the last month, upon realizing that he may have been too hasty, he tried asking OPEC nicely, but he was predictably ignored. It doesn’t help that he has undermined alternative sources of oil supply, by stopping the Keystone Pipeline and by threatening to prevent fracking on public lands.
Thus, in the search for transient explanations for these phenomena such as inflation, Senator Warren need not look beyond temporarily lower levels of foreign policy quality. Corporate greed and deceptive politicians remain permanent features of modern society.