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April 2, 2024 55 mins

One of the things we rely on is for the companies who make the stuff we need to not stick it to us, the customer. But it’s become painfully clear that’s just what happened during the pandemic and that it’s still happening today. What can we do about it?

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Episode Transcript

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Speaker 1 (00:01):
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and then right here in Atlanta on September seventh. Please
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Speaker 1 (00:41):
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dot com and click on the tour button and we'll
see you guys this year.

Speaker 2 (00:54):
Welcome to Stuff you Should Know, a production of iHeartRadio.

Speaker 1 (01:04):
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. The Timely Topical Edition. I haven't done one
of these in a while.

Speaker 2 (01:15):
Job. Yeah, Fight the Power Edition.

Speaker 1 (01:19):
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.

Speaker 2 (01:28):
Yeah. I'm kind of glad you picked this one because
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.

Speaker 1 (01:49):
Yeah, it true seems that way, Like I think, kind
of at the end of the day, the discussion over
what we're talking about, which is called greedflation, which is
a fairly new right. 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 the free market when there's you know, weirdness to it.
You know, 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.

Speaker 2 (02:53):
Now, let me ask you this, is it possible to
be a person who says, you know, I'm at that
percent behind capitalism and let it run amok and that's
just let it work itself out, and then also complain
about food prices like can those things co exist?

Speaker 1 (03:11):
Yes? Those people are called the worst.

Speaker 2 (03:15):
Okay, so it can co exist. I think so people
you don't want to hang out with.

Speaker 1 (03:20):
Right exactly?

Speaker 2 (03:21):

Speaker 1 (03:21):
Yeah. I think conversely too, you can be totally pro
capitalists and still be like the idea that it's just
business is kind of a moral.

Speaker 2 (03:30):

Speaker 1 (03:30):
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.

Speaker 2 (03:36):
All right, shall we jump in.

Speaker 1 (03:38):
Yeah, let's so. Ultimately what we're talking about are increases
and 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. Apparently, in twenty twenty
two in America, the inflation for food at grocery stores
increased eleven point four percent, and then in twenty twenty

three it added another five percent, and that was, you know,
half a little a little more than half of what
the increase had been in twenty twenty two, but it
was still double with the normal annual increases of two
point five percent, that's how much food typically inflates year
over year at the grocery store. Instead, in two years,

it inflated by almost seventeen percent. 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.

Speaker 2 (04:33):
Yeah, and there's you know, we're going to talk I
guess a little bit about kind of 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, because, as you'll see, I think is a
pretty even handed episode. We might get a hot hot
under the collar, but I think there's reason to be

So here we go. So one thing you will hear
and have heard a lot is, you know, the pandemic's
obviously a big reason for all this, the biggest driver
of it, and the disruptions to the supply chain. Whether
you were building a house or whether you were a
food company marking up your goods, the supply chain squeezed out.

It seems like everything on the planet, and there were
food item shortages, there were ingredient shortages, and that was
one of the drivers for inflation.

Speaker 1 (05:28):
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 just basically focused on coke for
a little while. Yeah, that caused a shortage. It was

just that sort bizarre and meandering in some cases, right.

Speaker 2 (05:52):
Yeah, which had nothing to do with raising prices, But
that's just a side.

Speaker 1 (05:55):
Note, right, it's true. Yes, you're right.

Speaker 2 (05:59):
So people ate at home a lot more during the pandemic, obviously,
so there was more demand that you know, these goods
were in shorter supply, and all of a sudden, there's
more demand for fewer those goods. And that is just
inflation one on one as far as how things get
out of control.

Speaker 1 (06:15):
Right. And then so if you are a processed food company,
you have to use ingredients, and a lot of ingredients
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 increased, which means they increased their markup their profit,
which means you put those two together, the price increases
in unnecessary clue GI economic terms.

Speaker 2 (06:51):
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
they're just happens to be an ingredient that is getting squeezed,
and so the cost of making a bag of Cheetos
or something costs more. They're not gonna companies aren't gonna
be like, oh, we've got to raise a price. Then
they'll just sort of absorb that to keep the prices

kind of steady and keep things flowing. That wasn't the
case during the pandemic.

Speaker 1 (07:17):
Though, No, and Chuck, that is that is a key
thing to understand, is what we are seeing those markups,
the difference in the price and the cost of the
company's pay to actually produce the product. Like that, that's
we've just never seen anything like this before. Economists are like,
I've never seen anything like this before in my forty

years of studying you know, food delivery and food supply
chain stuff.

Speaker 2 (07:45):
Yeah, and then people said, you've been studying that for
forty years, and.

Speaker 1 (07:49):
The guy's like, yes, someone please let me stop exactly.

Speaker 2 (07:54):
And then another thing that we heard here and there was,
you know, people got stimulus checks. A lot of people
did when unemployment was just so staggering during the pandemic.
So the government issued these checks. People had a little
more money in their pocket to spend, which was the idea,
and demand increased and so that push prices higher. The

thing is though Europe experienced the same inflation we did,
sometimes even worse as far as food costs go, and
they didn't get stimulus checks. So that one is a little,
I don't know, confusing.

Speaker 1 (08:32):
I guess it is. This way to say it, it is,
but just based on classic economic theory, 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 unusual factor that took place within the
context of a larger unusual period, which was the pandemic. Right,

you also had other things going on at the same time,
Like the pandemic wasn't enough. There were tons of bouts
of Avian flu that was killing hens left and right,
and I guess friar roasters, Yeah, the kind you eat too,
those chickens. So there was less chicken to go around
and less hens to lay eggs, which meant the price

of eggs and poultry would increase. 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 is weird in the context
of what's been going on lately too.

Speaker 2 (09:32):
Yeah, absolutely, and we'll talk about eggs more because, believe
it or not, eggs are a big story yet, you
know story. And then, of course, the thing we heard
a lot about was the war in Ukraine. That was
another sort of coexisting situation alongside the pandemic, which disrupted
wheat exports. You know, when you're a European country the

United States and you squeeze sanctions onto Russia, there's gonna
squeeze right back, and well, we've got oil that we're
not going to supply you anymore, and that's just going
to that squeezes everything. And all of a sudden, grain exports,
especially wheat, went up, which affects the cost of a
lot of foods.

Speaker 1 (10:12):
Yeah, because 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 unprecedented increase in
prices in the grocery store.

Speaker 2 (10:32):
All right. So those are a lot of the reasons
that we've been hearing about, you know, over the past
few years. But as far as like, what this actually
looks like in a grocery store. 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.

Speaker 1 (10:47):
Okay, so I'll be that person walking. Yeah, I've got
a hat on. Just imagine I have a cool hat on. Okay,
I don't I'm walking into the ground.

Speaker 2 (10:54):
I don't know that I've ever seen anywhere hat.

Speaker 1 (10:55):
Weirdly though, like I look weird right now.

Speaker 2 (10:58):
Well, it's because you're wearing a hat and.

Speaker 1 (11:00):
I'm walking in place.

Speaker 2 (11:01):
But weirdly, I think I've seen you walk in place,
but I've never seen you where I hat. So if
you talk to the USDA, they will say the price
of food in the United States is twenty five percent
higher this last year in twenty twenty three than it
was in twenty nineteen. What 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 on why airline by it costs, you know, one
thousand dollars to fly from Atlanta, New York. Now it
doesn't really a no, that's not true, but just airline
tickets are ridiculous now. Yeah.

Speaker 1 (11:40):
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.

Speaker 2 (11:47):
Yeah, Which that's no good, Like let's fill the planes.

Speaker 1 (11:49):
Up, for sure. But I mean, like, but true. Now
it's just cutthroat. It's like the oppas. It's like, oh,
you paid for your ticket a month ago, ts you're
off the flight.

Speaker 2 (11:57):
Yeah yeah, and the expense anyway, all that to say
that food food prices rose over that three year period
or four year period, more than any other category except
for transportation. And I believe you already talked about the
food increase 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?

Speaker 1 (12:21):
Okay, here, I come take off.

Speaker 2 (12:23):
Your hat when you entered like a good gentleman.

Speaker 1 (12:25):
No, I'm going to leave the hat on. Okay, sure,
it's a really cool hat.

Speaker 2 (12:29):
And you might notice that that loaf of bread over there,
just that white sandwich bread is twenty two percent more
expensive than it was just two years ago. God, and sir,
I see you're thinking, like, well, forget that I'm gonna
bake my own bread. Well, good luck with that too,
because that all purpose flour is twenty one percent more
expensive and butter is thirty one percent more expensive. So

I don't even think about baking a birthday cake.

Speaker 1 (12:54):
I can't even get a break on butter.

Speaker 2 (12:56):
I can't even I know butter is. I mean that
stuff right off the stick.

Speaker 1 (13:01):
So so okay, I'm still the guy in the hat.
I'm moving down another aisle. I'm like nuts. To make
it my own bread, I'll just eat a bunch of
ultra process stuff because that's dirt cheap. Everybody knows that.
Surely that hasn't increased in price.

Speaker 2 (13:15):
No, no, And since you said nuts, why don't you
go ahead and get some of those nuts because they're
about sixteen percent more expensive.

Speaker 1 (13:23):
Well, they make me pack on too much weight anyway,
so I'm fine with that.

Speaker 2 (13:26):
And by the way, sir with the hat, I want
to remind you that these stats for process foods are
just over one year. WHOA, from twenty twenty two to
twenty twenty three. You're paying sixteen percent more for the salties,
sixteen percent more for those cookies, eighteen and a half
percent more for that granola bar you think is held.
And if you want a little fruit snack, almost twenty

four percent more expensive. Not the fruit snacks, yes, the
fruit snacks.

Speaker 1 (13:52):
Chuck. This skit has gotten.

Speaker 2 (13:54):
Really dark, as dark as Halloween.

Speaker 1 (13:58):
Pretty dark. Oh actually, no, you're right. Halloween was a bloodbath,
especially if you're talking fun sized Snickers, because get this,
this is crazy. I mean even Halloween. Normally Halloween prices
are beyond nuts. But this is just really bad. A
bag of fun sized Snickers went from twenty twenty two,

or sorry, went from twenty twenty one to twenty twenty two,
It increased by one hundred and forty percent. You could
have gotten a bag of fun sized Snickers for five
bucks in twenty twenty one. You paid twelve dollars the
next year.

Speaker 2 (14:33):
All right, well there's nothing fun about that.

Speaker 1 (14:37):
Okay, So the skits over and scene or end scene,
depending on your view. And I'm gonna keep wearing my
hat though, Okay, all.

Speaker 2 (14:45):
Right, keep that hat on. That's a good setup, and
we'll be right back with more.

Speaker 1 (15:17):
Okay, So there's something to remember too, Like it sucks
to pay a lot at the grocery store, but if
you are 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, so it's an
essential thing to buy and you don't really have much

of a say in it if the food prices keep rising.
So it's really important to keep that in mind that
it's not just an annoyance, it's not just in your pocketbook.
It actually has pushed people into poverty classes in different
countries and developed countries because food prices got They were
kind of close on the border to begin with, and

then the pandemic came along and as the food prices increased,
they were pushed into poverty categories.

Speaker 2 (16:27):
Yeah, if you look at the Food Price Index, the
five categories meat, dairy, cereals, vegetable, oils, and sugar increased
fifty seven percent all over the world. Over a two
year period from twenty twenty to twenty twenty two, and
then a couple of years later here in twenty twenty four,
some prices have come down some quite a bit, eggs especially,

and again we'll talk about eggs a little more. They're
ones that really kind of reset back down again, but
not everything. And just over a two year period, a
fifty seven percent increase in meat, dairy, cereals, vegetable oil,
and sugar is going to have a real impact, like
you said, on families in the United States that don't

have as much money, and certainly hundreds of millions of
people all over the world in countries that didn't have
so much money to begin with.

Speaker 1 (17:21):
Right, So that's that's one side of it. Like this
is actually affecting and impacting people in very extreme ways. Yeah,
So 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 again, in
like record degrees in some cases.

Speaker 2 (17:42):
You mean these hundreds and hundreds of corporations that own
all these food companies, right.

Speaker 1 (17:48):
No, Chuck, do you have 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.

Speaker 2 (18:02):
Yeah. I mean, we were being kind of cheeky there,
but we've talked about this before the fact that they're
just a handful of huge corporations that own almost every
food And you know, this is obviously discounting 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.

Speaker 1 (18:20):
Yeah, yeah, I was going to say more and more.
They're a portfolio of one of these larger brands.

Speaker 2 (18:26):
Yeah, looking for that you know, big big money exit
and you know, good for them. But point is, there
are just a handful of these big corporations and if
you ask, if you sit down any of their CEOs
and grill them over this cost increase, they're going to
talk about those things we talked about at the beginning.
They're going to be the pandemic demic. Inflation was out

of control and there wasn't anything we could do. We
were forced to raise our prices to remain profitable. And
we're not saying that you shouldn't make a profit or
anything like that. Like, we get it that these are
for profit company, and those costs definitely did go up,
and they maybe could not take that all on the chin.
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, well, 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.

Speaker 1 (19:26):
Yeah, their profits didn't 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
in the United States, and the first quarter of twenty
twenty one to the first quarter of twenty twenty two,
they doubled their profits, not their revenue. Their profits. Yeah doubled. Okay,

one hundred percent times two doubled. Yeah, that's important, and
that's one year, year over year. Gill another huge conglomerate.
They had a record six point sixty eight billion dollar
profit in twenty twenty two, double its profit two years before.

Speaker 2 (20:09):
Yeah, and overall, food corporations had their largest profits during
the pandemic, during peak inflation, when everyone was getting squeezed
and hurt. The most food corporations recorded their largest profits
in seventy years.

Speaker 1 (20:25):
Right, And some of them even did while they were
losing sales, like General Mills. Sales were declining by like
nine percent in twenty twenty one and another four percent
in twenty twenty two, and yet at the end of
twenty two twenty two, their profits were up ninety seven
percent over the twenty twenty one I believe. So here's

where the sticking point is, Chuck, this is where where
views diverge because this is documented fact. Is that is
that just to be expected? Like, do people who are
mad about this greedflation idea not understand and basic capitalism
or do they have a point in saying like this,

this is approaching and probably has passed a morality?

Speaker 2 (21:10):
Yeah, I mean that's a question if you look we're
talking about corporations, but if you look at people. There
were sixty two new new food billionaires over that two
year span from twenty twenty to twenty twenty two, and
they calculated this is Oxpam who calculated this stuff. That
the food billionaires, which that those two words is interesting

together food billionaire, those food billionaires made more money during
the two years of the pandemic than they did in
the previous twenty three years combined. That's I mean, that's
the stat of the show.

Speaker 1 (21:46):
So economists like have started to dig into this, and
just like about anything else, there's liberal economists, that's a
conservative economists, And depending on where you fall, you probably
either agree, like, yes, this is greedflation or you're like, no,
people don't understand, this is just basic capitalism.

Speaker 2 (22:02):
Yeah, we can look at actual numbers though, to help
people make up their own mind. There's a nonpartisan group
called 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

goods and services, which food was a part of. Which
are unit labor costs, which are you know, the workers,
what you pay a worker, their salary, their benefits, stuff
like that. The non labor costs energy costs, transportation, debt payments,
tax i imagine for the food part, like the actual
food stuff is in there, right, sure, yeah. And then

profit margin, which is that markup that we talked about
that you know, that's what's going to generate the profit
for the company. And so they looked since twenty twenty,
and prices in the non financial corporate sector, which like
we said, foods are part of that group, have increased
six six point one percent a year on average, which

is three times the pre pandemic rate of one point
eight a year.

Speaker 1 (23:14):
Right, Okay, So they said, like under normal, normal circumstances,
all these costs are actually pretty well represented in a
steady way across the non financial corporate sector. Like inflation increases,
You can attribute increases in price, which is inflation to
those three things labor, non labor, and profit. You can

divide them up pretty pretty clearly. Normally, the largest contributor
to price increases are labor costs. In a normal economy,
they contribute about sixty two percent to inflation. The non
labor cost which is like you said, the costs that
to actually make the product and deliver it and all
that stuff, that's about twenty seven percent, And normally the

profit represents about eleven point four eleven and a half percent,
and you put all those things together, and that explains
the increase in prices year over year, which we call inflation, right.

Speaker 2 (24:13):
Yeah, and that, by the way, was over a forty
year period.

Speaker 1 (24:17):
Yeah, So that's, yes, exactly, That's what I'm saying, Like,
it's pretty stable or what has been stable over the
last forty years. Where it became totally unhinged from normalcy
is starting in the pandemic. It's starting about Q two
of twenty twenty, where everything just kind of went haywire

basically according to that normal forty year trend.

Speaker 2 (24:42):
Yeah. So labor costs, which over that forty years previously
accounted for about sixty two percent of increase in costs,
accounted for less than eight percent this time. Right. The
non labor cost previously, if you remember, was twenty seven
percent that is now thirty eight percent.

Speaker 1 (25:00):
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 increase in cost represents.

Speaker 2 (25:09):
Yeah, and then the you know what's coming everybody, uh,
that eleven point four percent over forty years of you know,
of the markup of the corporate profit that accounted for
an increase in prices went to almost fifty four percent.

Speaker 1 (25:24):
And 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.

Speaker 2 (25:37):
Yeah, the end, can we stop?

Speaker 1 (25:41):
Pretty I mean pretty much, there's because everything else is
just basically a matter of opinion at that point, 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. He like people against greed flation.

Speaker 2 (26:07):
Yeah, and that, like you said, that's a pretty catchy word.
There's an actual, like economics term. Like if you said, well,
you can probably get away with saying greed flation in
an ECON class these days, but.

Speaker 1 (26:17):
Sure everybody will think you're really cool.

Speaker 2 (26:21):
Previously, they say, look at the guy in the hat
walking in place saying things like greed flation.

Speaker 1 (26:26):
Back at it.

Speaker 2 (26:28):
The previous term for that was seller's inflation. There was
a guy in nineteen fifty eight named Abraham Lerner and
economists who he's a he's a Keensian guy. And we've
talked about the Keynsian approach to economics and what was
the other one?

Speaker 1 (26:45):
It's another guy, Oh, Milton Friedman, the Chicago School guy.

Speaker 2 (26:52):
No, I can't remember.

Speaker 1 (26:53):
Adam Smith, Yeah, that was it, the classical the guy
who came up with capitalism.

Speaker 2 (26:59):
Yeah. Yeah, those are sort of the general big two
schools of thought. And Keensians generally think that 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 Keynesian theories and they want to
slow that inflation, so they'll 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.

Speaker 1 (27:26):
Yeah, and this actually can control inflation a lot, like
a lot. But what greedflation is showing us, and what
some economists who study this kind of thing, seller's inflation,
have known for a while that kind of monetary policy
can't control corporate decisions to increase prices.

Speaker 2 (27:45):
In other words, seller inflation.

Speaker 1 (27:48):
Right, So that's seller induced inflation, another word for greedflation.
It just is saying like, 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
takes these standard economic narratives and theories and just turns

them on their head in a lot of situations. And
the reason why is in a normal economy where companies
are competitive with one another, that urge to increase their
price and make more profit is kept down from 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 eat this
generic wheat flakes rather than wheaties 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 wheaties.
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 pandemic offered in a lot of people's

opinion including CEOs as we'll see, basically once in a
generation opportunity for everyone to raise their prices for no
good reason, essentially because they wanted to.

Speaker 2 (29:06):
Yeah, I mean, there's a there's a sweet spot if
you're a company, you know, and you're making 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, And that's just
sort of the sweet spot where they have maximized their
profit and anything beyond that might get them, 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 corporations,

like the evil heads of them all got together on
a call and said, on the count of three, we're
all going to raise our prices together. It just sort
of happened that way 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

individually agree that this pandemic was a great cover to
raise prices that will never go back down.

Speaker 1 (30:22):
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 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 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 is

something you touched on. Competition is less today than it was, say,
ten years ago. Fifteen years ago, twenty years ago, because
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 produce seventy
or eighty percent 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 the pandemic gave 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
question again, is that a moral or is that just
normal capitalism?

Speaker 2 (32:11):
Yeah, and again we're not saying cover profits because all
those reasons were real. We're not saying raising their costs
to so they wouldn't like start losing money. We're talking
about like the kind of increases that we saw, which
was fifty plus percent profit increase. If you are the
Groundwork Collaborative think tank, you can go over transcripts from

these corporate earnings calls from these companies and they're flat
out saying it, you know, like they're saying, basically, this
is our chance at a market reset, like an adjustment.
We thought our products were too inexpensive before, so this
is our chance to really raise these profits because we
have all this cover. One of the exec sit ConAgra

even said the consumers will welcome the increased prey, which
is I mean, if that's not just out of touch,
you know, 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 this something.

Speaker 1 (33:14):
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 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 pay this, and well, 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.

Speaker 2 (34:14):
Yeah, But and that goes back to the previous thing
we're 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 We've just seen that happen all over, you know,

from gas costs to food costs. Like I remember when
gas I can't remember when it was. Veieler was in
like the late nineties or early two thousands, Yes, when
gas jumped like fifty or sixty 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
because over the previous maybe as long as there was gas,

but with the previous at least decade or so, 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 fifty cents.
And I just remember thinking I didn't even know why.
I knew nothing about it. I just remember thinking this
was what was it? Was it? Jeesu? Was it nine

to eleven? Maybe now 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
seventy five again or whatever it was.

Speaker 1 (35:33):
Right, Yeah, And so that's a really cynical view, but
it's entirely possible. You're correct that.

Speaker 2 (35:38):
It was correct.

Speaker 1 (35:39):
Yeah, it 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.

Speaker 2 (35:53):
Yeah, that's what I'm saying.

Speaker 1 (35:53):
And it didn't really ever drop below that. And then
that new baseline gave them an opportunity later on to
ratcheted up to a new normal and so on and
so forth, and under normal conditions, that's just inflation, right,
Like the prices are supposed to grow over time. It's
like a sign of a healthy economy, but it needs

to be around two to three percent something like that.
What we're talking about is well beyond that. But that
does seem to be what we're seeing here too. And
at least one of the CEOs from their 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 in poverty.
Now they'll get used to it. And the other terrible
thing about it, Chuck, is that they're driving inflation. They're
making it. They're making everything more expensive, 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.

Speaker 2 (37:11):
All right, let's take another break, then we'll talk about
more of this stuff right after this.

Speaker 1 (37:45):
So thus far we've been leaving grocery stores kind of
out of the conversation and under normal circumstances that would
make sense.

Speaker 2 (37:54):
Oh okay, I was wondering if we were gonna get
the grocery stores.

Speaker 1 (37:58):
Right, because grocery stores, if I kind of a check
on food manufacturers, like the big chains and probably even
mid size 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 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. And then so normally
that ends up being like a check on how much
food companies mark up. Makes sense. 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.

Speaker 2 (38:48):
Can you believe it?

Speaker 1 (38:49):
Yeah. The FTC recently conducted a study of nine different
grocery stores and food wholesalers that includes Kroger, Amazon, and Walmart.
And they found that as an end street, they didn't
they weren't able to get like individual company data, but
they found that as an industry their profits went up
out of step with their costs.

Speaker 2 (39:10):
Oh geez, here we go, just like.

Speaker 1 (39:12):
The food producers, although it wasn't nearly as dramatic as
the food producers. For example, in twenty fifteen, the peak markup,
the peak profit was five point six percent across the industry,
and then in twenty twenty one it went over six percent,
and then two years later it hit over seven percent.

No boy, And again this is out of step with
their costs. And they also found that the large chains
used their clout to basically get their hands on scarce
products and edged out smaller competitors, so they basically created
mini monopolies 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.

Speaker 2 (40:02):
Yeah, I mean I can tell when I go to
the grocery store. It's a big difference.

Speaker 1 (40:06):

Speaker 2 (40:07):
One thing we should mention kind of quickly here is
this idea of shrink inflation, because that kind of figures in.
That's another sort of sneaky way to increase profits. That is,
when you pay the same price for less of something
that you used to get, whether it's you know, five
less dishwasher detergent inserts that come in the packet, or

whether it's ounces off of a chocolate bar or ounces
out of a coke bottle, 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 two liter coke one point seventy five
leaders if we just keep the price the same, and
that's what happens.

Speaker 1 (40:52):
Yeah, it's another form of inflation, even though the price
doesn't go up 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 attrack inflation actually adjust for that because it's
so widespread. Shrink flation is. But one thing that's not
typically tracked is something related called skimpflation, where the ingredients

or the packaging or something degrades or downgrades to save money,
and that actually affects the price or the value or
the quality of what you're paying for. 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.

Speaker 2 (41:35):
Yeah, so you mentioned other schools of thought. We're going
to talk about some of those, because there is no
arguing that during the pandemic that the prices just went
way way up, like that's just it's a fact. But
there are economists at the FED, the Federal Reserve Bank
of Kansas City 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 twenty twenty through about the first quarter of twenty
twenty one, and the inflation didn't get really bad until
later on in twenty twenty one and just devastatingly through

twenty twenty two. And so the Kansas City economists basically
said that they raise 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.
It's kind of smooth things out over time.

Speaker 1 (42:38):
Yeah, instead of one big increase, maybe five smaller increases
that equal that seem big increase, right, Yeah, and that
makes sense. That actually is pretty smart. I mean, like,
if you're a business, of course you want to predict
increases in cost. The thing is is the fact that
prices don't normally come back down. What we were talking

about with your anecdote about a gas going up. Yeah,
that when prices 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 as riggs, right, eggs are the miracle. So as

they're as companies like costs, their marginal costs 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. That is an explanation that's
definitely more in step with the idea like this is
just normal capitalism. Like it happened to be a seller's

market 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.

Speaker 2 (43:59):
Yeah, for sure, there are people that are like, hey,
this greedflation thing, I don't agree with it. There's a
guy named Eric Levittz at New York Magazine who had
a very long piece critique basically on the greed plation
argument and said a bunch of things that we're going
to go over now. But the person was that, Hey,

these 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. But
what we're and a lot of people, including Robert Reich,
who's a very smart guy, are pointing out it's like, no,
what they're saying is it gave him the cover to

do that, and they've sort of admitted this on the call.
So I just say throw that one out right away.

Speaker 1 (44:46):
Yeah, it totally discounts the idea that brands try to
cultivate goodwill with their customers, 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 to
throw that one.

Speaker 2 (44:59):
Out all right. The next one was, and this is
kind of what you were talking about, but that fifty
four nearly fifty four percent increase in corporate profits. He
argues that it's it's the effect of inflation, not the cause,
and that we've got it backwards. Josh and Chuck have
it backwards right exactly.

Speaker 1 (45:20):
That 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 mean, it's a it's a legitimate explanation it's just again,
it skirts that issue of whether that's okay.

Speaker 2 (45:38):
I guess yeah.

Speaker 1 (45:40):
And then the other thing that Levits eventually settles on
is he's like all that stuff that people say, that
pandemic narrative for higher prices, all that's correct. Demand was high,
supply was tight, people had way more money than they
normally do. All of a sudden, Uncle Joe Biden sent
a bunch of checks and that corporations have always been greedy,

and that 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.

Speaker 2 (46:22):
Sure that's pretty inconvenient for a lot of people, exactly.

Speaker 1 (46:26):
Yeah, And a lot of people are saying, like, no,
we've got to do something about this. There's a Society
general banker economist named Albert Edward or Edwin, I can't
remember Edwards, I think, and he said that what he's seeing.
This is the guy who said he's been at this
for forty years and he's never seen anything like it.
He said that it's unprecedented and astonishing levels of corporate

greed that we're seeing as a result of these price
increases in these profit margins that we're seeing are eye popping.
This guy's an economist student for forty 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 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.

Speaker 2 (47:23):
Yeah, And I mean they're even like super capitalist Keynsian
economists who agree about Parch part of that, which is like, hey,
if there's a like a real bottleneck of a commodity
that only a handful of people control, you should cap
that commodity price so they don't get together and gouge

people when there's a real squeeze on like a particular
specific thing, right, not not like an overall like cap
on the price of cereal or something.

Speaker 1 (47:57):
So the thing is is that there's there's plenty of
story worries of horror stories from the past where capitalist
economies have tried to use price controls and that they
can lead to scarcity because suppliers would 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, but there's not there's not a lot of
alternative ideas, Like there's a sense of helplessness and everybody
who tends to rely on the federal government to solve
like major massive problems like food suppliers gouging customers. You

got basically either price controls or to me, the more legitimate,
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
and you you can't help it, that's just what your

profits are. If it's a during a pandemic or during
a crisis, or 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.

Speaker 2 (49:19):
Now is that trigger? Is that like U during a
specific time or is it like a specific like a
percentage increase in profits triggers it or both?

Speaker 1 (49:31):
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 you know, a
twenty percent increase in profits is going to get taxed

at ninety percent or something like that, Like, yeah, you
can make the profits, but we're going to take away
more of it because we got to help out these
people who are hurting. While your benefit, we need to
keep things a little more even then these guys are benefiting,
these guys are starving, which is the current narrative.

Speaker 2 (50:08):
What you're forgetting, though, Josh, is when corporations have these
huge windfalls of profits, they pass that along to their
employees by raising their wages and to the consumer eventually too. Right, Sure,
sure isn't that How isn't that how it works? Yeah?

Speaker 1 (50:21):
They drop their prices, right.

Speaker 2 (50:23):
They just don't keep that for themselves, right.

Speaker 1 (50:25):
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 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 think that's necessarily like a
pure capitalist 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 capitalist a capitalist economy, but why can't you
also be like, 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.

Speaker 2 (51:48):
Yeah, and this is especially 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 is something that people literally need to
live everywhere.

Speaker 1 (52:08):
Right, you know, like recreational pontoons aren't what you'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 conversation than if we were talking about a
different commodity or different.

Speaker 2 (52:22):
I mean, it seems like it. But geez, I'm sure
we'll hear from people that say that we don't know
what we're talking about.

Speaker 1 (52:29):
And oh man, we're going to get some ugly emails
from people. It's fine, we can do it.

Speaker 2 (52:34):
Those people don't complain about the cost of food.

Speaker 1 (52:37):
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.

Speaker 2 (52:46):
Yeah. We're just people. Yeah, we don't have some We
never took some oath of neutrality right to be podcasters.
I think people think that sometimes.

Speaker 1 (52:57):
Right, Yeah, for sure, we're just a couple of regular dudes,
one of whom is wearing an awesome hat.

Speaker 2 (53:02):
Right now, walking in place.

Speaker 1 (53:05):
Weirdly, you got anything else? No, Well, go forth everybody
and decide is greedflation 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 those, said Tom. And in the meantime, I say, Chuck,
it's time for a listener maw.

Speaker 2 (53:24):
All right, Hey, guys, just want to say thanks for
keeping me entertained since the pandemic. I've been the office
random facts guy. I'm already that guy.

Speaker 1 (53:34):
This guy sends random facts to people.

Speaker 2 (53:36):
No, no, no facts, gotcha. Yeah, that'd be funny though. It's
a good bit. People to just hear that sound, that
fact sound, and they're like, God, Gary's at it. I'm sorry,
it's Daniel, I'm already that guy when it comes to
a lot of the things I treat, but now it's
about all things. Because of long rides to Ohio to

see the family. My toddlers even asked for stuff, you know,
specifically the fire truck episode that's cute makes sense, 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.

Speaker 1 (54:11):
Birthday buddies, so oh hey, happy birthday.

Speaker 2 (54:14):
That's right, he says. And not cancers anymore. Did they change?
Did they change that?

Speaker 1 (54:18):
I don't think so well, I'm to look into it.
I have felt a little different in the last couple
of years.

Speaker 2 (54:24):
All right, 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 Lynn, who has become
a fan. So that is from Daniel Klein and Lynn
and their kids.

Speaker 1 (54:37):
Nice. Thanks a lot, Daniel, thank you for indoctrinating your
children into stuff you should know. Universe.

Speaker 2 (54:44):
That's right, and they're also listening now to Biblical time machine.
Okay from Dave Ruse.

Speaker 1 (54:50):
Is it biblical or is it Bible time machine?

Speaker 2 (54:53):
Daniel says biblical and I'm not sure and we're not
going to look it.

Speaker 1 (54:56):
Up right either way. It's a top notch Dave Ruse
podc And by the way, Dave Ruth's helped us with
this episode too, so that's very appropriate. Double Dave yep again,
Thank you, Daniel, and if you want to be like
Daniel and get in touch with us, you can send
us an email to Stuff Podcasts at iHeartRadio dot com.

Stuff you Should Know is a production of iHeartRadio.

Speaker 2 (55:21):
For more podcasts my heart Radio, visit the iHeartRadio app,
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