Inflation Blame Game Targets Consumers And Workers

Inflation Blame Game Targets Consumers And Workers

The drumbeats of economic blame have been pounding away. Inflation. Inflation. Inflation.

Some, like Lawrence Summers, have been saying this for many years. Too much money in the system that would in theory boost activity and eventually drive prices up.

Or, as an economist, who will remain anonymous, once said jokingly about a big name in his field and predictions of recessions, “Paul Krugman made a career of saying, ‘We’re going to have a recession this year” for 15 years. When one finally happened, he said, ‘See? I told you.’ And he got the Nobel Prize.”

Oh, Nobel Committee, Summers is waiting for that telephone call.

Ironically, as someone who’s frequently been wrong and loath to admit it, as Michael Hirsch wrote about Summers some time back in The Atlantic, there’s a strong argument that he helped propel the reckless global capital flows and fight off regulation that would result in the Great Recession, the “printing” of money to try and get the economy out of the crash, and a good ten years or more of financial misery for many millions of Americans.

But, that was then and, finally, inflation reared its ugly head after the collapse of supply chains during the pandemic. And yet, too many voices argue that the issue is rising wages and people spending too much. Except that almost 70% of the economy is consumer spending and The Powers That Be wanted things to gear up again.

In times of economic disaster—because that’s one of the big factors in who might come out on top in an election year—policy makers want patsies. Yes, supply chains actually have been a huge part of inflation. Companies disregarded warnings from experts over 30 years that without better design and operation, a company’s operations could founder on a hiccough anywhere along the intricate interactions of vendors that result in finished goods to sell.

But that’s growing old, even though supply chain practice hasn’t significantly changed and would take a long time to fix. Then cam Russia’s invasion of Ukraine, and that’s a factor in energy and food costs, but inflation was already on the rise months before.

So, now, you can hear mentions of rising labor costs, consumers having spent too much. Except, the bulk of people continue to be in the dumps. Many had paid off debt with a little bit of extra income from pandemic relief funds. Now, Americans again feel the squeeze. In so-called real terms, after inflation, average wages are down 3.9% according to the Bureau of Labor Statistics. Given how upwardly skewed average wages are, given the high rates people in the top 20% are paid relative to everyone else, most people are likely taking even more of a beating.


The vast sums of money that was “printed,” as many like to call it, isn’t just due to the Federal Reserve. Technically, every time a bank makes a loan, every time consumers take out loans to try and keep their heads above water, that also is printing money. Using your credit card creates money.

One way to slow money creation is to pay people enough so they can afford to live without putting so much on credit, a practice that, while it was receding, has taken off again and is back to nearly historical levels. By the time the latest data is available, the credit card bills probably will have set new highs.

But that would require sharing, which is something that, despite being a basic part of kindergarten curriculum, is generally ignored by large corporations and the wealthy. Most of the money that came out of the Fed, and also Congress, landed in the laps of those whose fortunes tend toward the upper end.

Reporter Matt Taibbi, who has seen these games before, recently put together some of the figures. The Fed had $4.24 trillion in assets—pretty much meaning government bonds, but also corporate bonds—at the start of the pandemic. To ensure liquidity in markets, so companies and people could get the cash they needed, the Fed bought a lot more, which pushes money into the system. The peak in April 2022 was almost $9 trillion, adding $4.7 trillion in liquidity and “creating the illusion of a boom.”

“Where did that $4.7 trillion go? Virtually across the economic spectrum, we watched people at the top of the income distribution magically achieve personal net worth increases that bore eerie resemblances to the near-doubling of the size of the Fed’s holdings,” Taibbi wrote. The collective wealth of the 727 billionaires in the U.S. went from about $2.9 trillion at the start of the pandemic and went up $1.7 trillion.

Private equity companies did almost $1 trillion in deals, using borrowed money, in 2021. “There is no chance so many PE firms could have made so much taking over so many companies (resulting in job losses at firms like PetSmart and even some hospitals and emergency rooms society needed during the pandemic) without this extraordinarily loose credit environment,” he added. Banks made record profits.

How much money did consumers get to reportedly bankroll inflation? Don’t even ask. All the money that went into the hands of the wealthy kept pushing up stock prices, especially with the help of corporate buybacks, real estate prices, and other assets.

“If we raise wages, that’s going to add to inflation,” says Giacomo Santangelo, a senior lecturer in economics at Fordham University. “But consumers are left holding the bag. When policy makers turn around and go in order to fix the situation, we’re going to raise the taxes on corporations. How do you think they’re going to respond? They’re going to raise prices on consumers. They’re going to lay off workers. They’re going to bring in more automation.”

In other words, the problems are official the possession of consumers. If only they were more responsible.

Except they aren’t, really. They’re just the grand patsies the system likes for posterior coverage.


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