Why The Mass Media Cannot Name The Inflation Culprit
by Richard Cameron
Why The Mass Media Cannot Name The Inflation Culprit
According to the narrative on the economy and the election, as outlined by the broad spectrum of the television, print and online news reporting – inflation is a prime consideration among voters in the upcoming fall midterm elections. And over the past eight months, they have named a variety of factors accountable to the rate of inflation that has been spiking during the last 12 months.
Chief among the causes we’re told, are international commodity markets bidding up the cost of oil and gasoline and supply chain disruptions. Then, if merely by implication, the general blame for the perceived pain at the grocery store, the gas pump and elsewhere, should be placed on the doorstep of President Biden. After all, he has a magic wand to wave (they give it to you at the inauguration) and he’s either too careless or too feeble to wave it and here we are. Although, in all fairness, perhaps Trump took it with him to Mar A Lago when he packed up all those classified docs.
But there is another prime factor, actually the number one factor, that the networks and other media organs shy away from mentioning and if they do mention it, they steer clear of the implications.
They know who it is and they are not going to pin the tail on the proverbial donkey. Why? Because attributing this element to the inflation picture is considered by the arbiters of content as being a wee bit radioactive. Doing so would be an unwelcome slap in the face to the viewing audience and advertisers would be on the phone with the network, PDQ.
What is it? Actually the question should be framed – “Who is it?” The answer is – as it relates to our domestic economic circumstances, is the American consumer.
Yes, that’s right. I realize this is not going to go over well with some of my readers. However, since we have no advertisers to whom we must account for ourselves to, and I never shy away from taking anything head on, even if it means causing the reader to confront reality, we’ll outline the case and you are welcome to blame me for stepping on your toes, but only if the shoe fits.
The finger of blame for the off the charts inflation we’re experiencing should properly be making a complete You Turn and pointing back at the owner of said digit. Some will react reflexively, “Wait, what? That is preposterous. I don’t manufacture any of these products, nor do I distribute or sell them. I don’t grow any of the food and I don’t refine the petroleum. What do I possibly have to do with it?”
Excellent – thank you for asking. While attempting to avoid being pedantic, I must set up the premise of my argument with a foundational truth of market economics – the axiomatic principal of supply vs. demand.
Supply and Demand
In the case of the inflation ‘crisis’ we’re focused on and that the Federal Reserve is reacting to by aggressively hiking the federal funds rate, the increase in the cost of goods and services is primarily being driven by the demand side of the equation.
Dramatically increased demand has stressed the ability of the providers (farmers, refiners, manufacturers, retailers, service sectors) to meet the ramped up consumer demand and consequentially, prices have spiked. Are there some cases of opportunistic price hikes, or what some refer to as ‘gouging’? No doubt.
Surging demand has also affected another component of market pricing resulting in inflated cost of production and delivery of goods and services – the cost of labor. Here again, supply and demand raises its ugly head.
As has been pointed out, the shortage of labor has resulted in employees’ hourly wages rising, which on the face of it is long overdue from an economic justice standpoint, but when looked at as a loss / gain equation, has not really solved the problem for the working poor, since price increases have eaten up most of the wage gains.
Post Pandemic Consumerism – “Pent Up” and “Cooped Up”
Journalists that report on the economy and on the factors contributing to inflation, do, from time to time, allude to the behavior of individuals and households that we are highlighting without apologies here. In passing, many will cite terms like “pent up demand” from people who felt “cooped up during the Covid lockdown”. That’s as far as they will go in terms of intimating from whence the pressure that most directly results in inflation emanates from.
It comes up occasionally in reporting on retail sales and on news segments that touch on the crowded conditions and overbooking at the nation’s airports that result in flight cancellations and long delays at the airline terminals, not to mention the dramatic increase in the price of tickets and accommodations.
The most direct reference to the correlation between consumer activity and the upward surge in prices, was in a report from the Washington Post in February of this year:
That surge in spending was most evident last summer, when households were emboldened by a lull in coronavirus infections and widespread vaccine availability. Subsequent rebounds have been less pronounced, though economists say they still provide a notable jolt to the economy.
This time around, the expected burst of spending comes just as the Federal Reserve prepares to raise interest rates to slow inflation, fueled by consumer demand that is widely seen as unsustainable. Prices are rising at the fastest rate in 40 years, which Fed officials have said is the biggest threat to the economic expansion.
Little has ever been said about the foolishness of flitting around the country during the pandemic. It’s impolitic and tactless to suggest that such behavior is reckless. That is especially true when your advertisers are bombarding the viewing audiences with commercials imploring them to shake off the shackles of inertia and venture forth to entertain themselves with the alluring breads and circuses that distract them from even reflecting on what the consequences could be.
Rachel Kazez, is a mental health professional in Chicago, Illinois. She has clients who have discussed with her their frustrated lust for wanderlust following the lockdowns. Many want to follow the trend here in 2022 to “go big” — but she notes that they are looking for ways to tamp down the anxiety that may accompany those supersized ambitions.
She said her patients increasingly are saying “‘I was cooped up for a year and I just want to go nuts. Let’s do whatever fantasy we’ve been thinking about’.”
Travel booking sites have capitalized on the widespread perception that not travelling is an extreme deprivation that should be avoided at all costs and that if not satisfied, may even precipitate mental illness, as demonstrated by this advertisement from Kayak:
The Fictitious ‘Lock Down’
If I may slightly digress for a moment, I have to comment that I can sympathize with the distress and trauma of people in countries like North Korea, Saudi Arabia, Russia and China, to name just a few notable examples, that are unjustly imprisoned and separated from their families and loved ones, most all on grounds that they are considered political opponents. But Americans were never “locked down” during the last two years.
Locked down, literally, is what people in major metropolitan areas of China have been subjected to in that government’s “Zero Covid” campaigns.
That there is a segment of the population here that describe., as some form of “imprisonment” or “incarceration”, municipal or country orders to limit the spread of the virus, is frankly an absurdity and an embarrassment. We sound like a nation of snowflakes or what I might, in one of my less charitable moments, classify as a collective jackwagon.
Public health mitigation (other than mask mandates) were almost never enforced with the exception of some large superspreader gatherings of dozens and in some cases, hundreds of people in homes and in public.
The invitations from the travel and hospitality industrial complex have not gone unanswered. Well before the case counts and daily death counts from the coronavirus began showing a brief downturn in the statistics, a large segment of our society, declared that nothing would prevent them from resuming life as ‘normal’. That meant returning to amusement parks, crowded sports arenas, indoor entertainment venues, packed airline cabins and the notorious incubators of viral spread – cruise ships.
The travel and tourism industry, naturally glamourizes everything. The last thing you would see or hear about is overbooked flights, people crammed into packed jets and unavailable hotels at your destination, even though that would be the first thing you would see as soon as you commence the adventure.
I won’t belabor the point of how all of this has prevented America from conquering COVID-19, other than to mention that the case counts here in August, are well above 100,000 daily and deaths are steadily increasing now to an average of nearly 500 per day.
So, despite the perception that the pandemic is effectively over, the fact is that it is once again on the upswing and that even at present, over one third (100 million plus) of the population has not had even a single vaccination against the virus.
Inflategate – no, not that one …
But, back to the inflation issue. Consumer activity is the leading driver of the so called “pain in the wallet” that people are up in arms over. The New York Times did finally acknowledge that fact in June, noting the following at the very top of their list:
Strong demand. Consumers are spending big. Early in the pandemic, households amassed savings as they were stuck at home, and government support that continued into 2021 helped them put away even more money. Now people are taking jobs and winning wage increases. All of those factors have padded household bank accounts, enabling families to spend on everything from backyard grills and beach vacations to cars and kitchen tables.
And even after all the reporting about record breaking household debt (over $16 Trillion) and the likelihood that the United States will soon be entering into a recession, the unbridled spending continues apace. According to FTI Consulting:
While many millions of Americans struggle with high inflation and are forced to make difficult spending choices and tradeoffs, those who have money are spending it abundantly, and this is contributing largely to the persistence of an inflation problem that took root just over a year ago.
We know why homes are now unaffordable. It was because people allowed themselves to be caught up in the fever pitched auction house environment of bidding up prices on houses when interest rates were relatively low.
People cast aside the traditional cautious considerations about their finances and about their future employment prospects, in order to win residential property that wound up wildly outside of the realistic valuation of rational economic fundamentals. To put it simply, people went nuts and ratcheted up the market beyond comprehension.
The problem with this sort of hysteria and recklessness is that the American economy is primarily structured on financialization, a prevailing economic model, in which valuations of assets are largely based on speculation and Wall Street fermentation, rather than productive growth. This results in frequent and predictable boom and bust cycles. If I may direct your attention to Investopia’s summary of what takes place in these boom and bust cycles:
During a boom, a central bank makes it easier to obtain credit by lending money at low interest rates. Individuals and businesses can then borrow money easily and cheaply and invest it in, say, technology stocks or houses. Many people earn high returns on their investments, and the economy grows. The problem is that when credit is too easy to obtain and interest rates are too low, people will overinvest.
This excess investment is called “malinvestment.” There won’t be enough demand for, say, all the homes that have been built, and the bust cycle will set in. Things that have been overinvested in will decline in value. Investors lose money, consumers cut spending and companies cut jobs. Credit becomes more difficult to obtain as boom-time borrowers become unable to make their loan payments. The bust periods are referred to as recessions; if the recession is particularly severe, it is called a depression.
Debt that is acquired in a boom cycle, winds up being a liability when the economy enters a recession. As it is, many individuals and households report that they are living “paycheck to paycheck”. Even if this is just slightly overblown, it is a major red flag that people are ignoring at their peril. And ignoring it, they evidently are, with industry analysts reporting extraordinarily robust summer travel in spite of the ongoing pandemic with airfare and lodging hitting record increases.
“Revenge Spending” with a vengeance
Travel insurance vendor Allianz Partners recently estimated that Americans’ summer travel to Europe will increase sixfold over last year. It’s the result of “revenge spending,” a term that has recently entered the lexicon in the wake of COVID-19.
They go on to report that most mid-tier and upscale restaurants in Manhattan are packed again despite menu price increases of 10%-20% in the last few months. Car rental prices in most major cities are through the roof — and cars often are sold out. That’s on top of record holiday sales, which jumped 14 percent to $886.7 billion, according to the National Retail Federation.
What drives this mania? The explanation doesn’t fit on a bumper sticker, but among the ingredients are intensive marketing from retailers, the hospitality and travel industry, and service providers – and a markedly different cultural orientation in America.
Two of the most neglected subjects in our educational system are civics and economics. Consequentially, millions of consumers are financially and economically illiterate. That is to say that they have little to no situational awareness of their personal finances.
A generation or two ago, most purchases were made with a thing called a “checkbook” linked to a checking account. Someone had to keep an eye on the account and balance it in order to avoid bouncing checks and incurring fees from the bank for overdrafts.
Credit cards, on the other hand, require the sort of discipline to manage that many just cannot marshal their will to perform and the balance on the account is something that eludes their grasp until the day of reckoning arrives. Another way of describing it is that once you put the accelerator pedal all the way to the floor, it’s harder to apply the brakes and in this analogy, there is no speedometer to even be aware of the rate of speed you are traveling.
“My friends all drive Porsches, I must make amends”
There’s more to it, though. Social media, such as Facebook, features people on one’s friends’ list posting about traveling, dining and consumer consumption and has become a measuring stick of how happy you are with your life and your experiences.
An unacknowledged competition commences in which people vie in demonstrating their happiness by displaying evidence of material acquisitions and expensive experiences. It drives a sort of a snowballing psychological effect that behaviorists call “social comparison”.
Researchers Shaohai Jiang and Annabel Ngien, writing in Sage Journal, describe social comparison:
On social media, people often selectively reveal themselves and construct their preferred identities or characteristics (e.g., emotions, personality traits, opinions; Vogel et al., 2014). When users are notified about other people’s life updates through social media postings, they would spontaneously and unintentionally practice social comparison (D. T. Gilbert et al., 1995).
This used to be described back in the day as “keeping up with the Joneses.” The result of social comparison, is a compulsion to measure up to the most seemingly upward mobile individuals we know on these platforms. What is lost, is perspective.
People who post on Instragram or Facebook, almost never portray the problems, crisis’s, challenges and disappointments they face, much less their failures. We see the most idealized version of our friends and acquaintances. This, in turn, elevates the anxiety of needing to measure up.
The most likely immediate remedy is to pursue some status enhancing or reinforcing experience such as a prestigious destination or symbol of conspicuous consumption and the cycle renews itself endlessly.
The herd mentality plays a compelling role in societal behavior. If thousands of people are refusing masks and resisting vaccines, it must be the thing to do because “everyone is doing it.” Same goes for the groupthink behind embarking on extravagant and far flung vacations and shopping sprees at the most inopportune time (the spread of Omicron and upward ramping inflation).
We, as a society tend not to take our cues from the wisest among us, but from the cows that are at the front of herd, no matter how lost or foolhardy they may be.
It brings to mind that classic conversation between parent and child. The mom learns that the kid has done something really stupid, risky and rule defying and the child excuses the behavior, saying, “yes, but everyone does it”, to which mom replies, “if everyone was jumping off the edge of a cliff, would you join them?” What we’ve witnessed from the behavior indicated by the economic data, the answer is apparently … “Yes!”.
Related to this, is that the complexion and character of American society has been changing rapidly from the last century to this one, in that our collective values have changed from the sensibility of delayed gratification to instant satisfaction. If something triggers a materialistic impulse, it has to be consummated at warp speed without consideration of the long term or even mid term risks.
According to Psychology Today, shopping dramatically lights up the dopamine centers in our brains. It feels really good to shop, so it’s not exactly surprising that people are predisposed to part with their cash after the deprivation they believe they have experienced during the run of COVID-19.
That is a proven fact of brain science, but it is also a fact that the surge in the pleasure stimulation of dopamine before and during a purchase, is followed shortly thereafter by a crash when one reflects on the practicalities.
Anyone who has driven down a residential neighborhood when garage and yard sale season is in full bloom, recognizes the piles of toys and fad items that adults and children are already bored with, much of it even purchased during the previous holiday season or the one before.
Eventually, when the infatuation has gone cold and the cycle is complete, it all winds up in landfills and launches the next phase of the disposable culture and more warming of the planet. We can see the results of that on a daily basis, with drought, fires, floods and tropical storms.
At one point in the last century, especially in the wake of the Great Depression, Americans embraced the ethic of saving money, conserving resources and planning for unexpected contingencies. That has, at this point, been completely turned on its head. Many, not all, are now narcissistic and self indulgent. If that seems a harsh assessment, consider this. Ola Majekodunmi, founder of All Things Money, explains the “Revenge spending” syndrome.
“Revenge spending is a term used to explain the urge people have to spend money in order to essentially make up for ‘lost time.’ This trend usually takes place after an unprecedented event, such as a global pandemic. We do it because we want to enjoy ourselves after a tough year of nearly being able to do nothing.”
“A tough year“? Seriously? I’m not entirely confident that the rank and file citizen of today would be able to cope with the deprivations that faced men and women during cataclysmic events in our history such as World War II. No one would have even entertained the idea about piping up about their “personal freedoms” when everyone was making sacrifices to win the battle for democracy.
“Party on, Wayne!”
Americans, to a great extent are obsessed with partying. Engaging in thought, quiet reflection and contemplation are things that equate to boredom and are greatly to be feared and avoided if at all possible. Self restraint is an alien concept. Living in the moment is at the very top of the priority pyramid – and with many, it is the only thing in the priority pyramid.
We live lives vicariously through what are objectively the most contemptible of celebrities, sports idols, entertainers, public figures and elected officials. It’s difficult, if not impossible, to do all this without spending one’s self into a precarious financial state. And in the aggregate – we have too many dollars chasing too few goods and what ensues is the inflationary predicament we find ourselves facing.
If you’re still here with me at this point, I’d like to take a moment here to point out a couple of things. I’m not intending to make the case for asceticism or a monastic lifestyle and extreme self denial. Fun is a necessary aspect of life, as least as it is perceived in the developed world, and people need healthy outlets for stress.
I wish to also clarify that I understand that the American economy, to a great extent, revolves around what transpires at the cash register, either brick and mortar or online. A lot of jobs are involved. For that reason, I am not advocating that people stop buying stuff. I’m actually not advocating anything at all. This essay / analysis is intended to provoke thought. What you do with the thought and what conclusion you arrive at, is your own business, not mine.
But I do feel in some regards, we have gotten lost in the amusement park. The equation is grossly out of balance. Conducting one’s self responsibly during a pandemic is its own reward. Just because you have the means to do something, doesn’t always translate into it being sensible or appropriate in every circumstance. I think of the poet William Wordsworth, who wrote, “Getting and spending, we lay waste our powers”.
People, early on in the perceived easing of the pandemic, saw reports nightly about the chaos at the nations’ air terminals and the missed flights and the misbehavior that ensued from the mad rush to be first in line to ‘move about the country’. They saw them and they proceeded to ignore them entirely and plowed ahead and we are still experiencing the madness – lost luggage, missed connections, canceled flights, and insane fares.
The bad decisions are very much analogous to the Cleveland Browns. The Browns’ management and owners saw Deshaun Watson’s availability as a free agent and cast aside all voices of caution in order to be first in line to sign him. Now they enter into the 2022 NFL season with a quarterback who was intended to start, who will not be available for all but six of its regular season games. Haste makes what? That’s right, waste.
And it is a matter of ethics to take personal responsibility for problems we have played a role in creating. That said, it is easier to blame President Biden for inflation and product shortages. Much easier than to consider if our own behavior contributed to any of it.
One more thing. When it comes to the price of gasoline for example, I have a great deal of compassion for men and women who must fuel up their work vehicles in order to make a living. They truly deserve a break.
And there are actually some people, many in fact, who put it all on the line for this country during the pandemic – front line doctors and nurses, first responders, essential workers and they all need and deserve a respite from the stress, much more than some of you need to go to Las Vegas or Disney World.
I have quite a bit less respect for people who bitch about the cost of a gallon of gas, but at the same time, somehow manage to fuel up their gas guzzling pleasure vehicles and RVs and drive all over hell’s half acre and blame someone, anyone other than themselves for the obvious consequences of that inconvenient fact of life – the law of supply and demand.
It’s ironic when you think about these polls where a random sampling of people are asked whether the country is headed in the “right direction” or in the “wrong direction”. Does the thought ever cross their minds about the role they play in that orientation? No, instead it is considered a measurement of whether a particular president or party is effecting a favorable outcome.
That is upside down. The country heads in one or another direction based on your actions and your level of participation and commitment. Politicians don’t determine it, they only reflect it. If you think I’m wrong, I submit to you the national cult of Trump and Trumpism as Exhibit A.
Am I wrong here? If so, I’ll be happy to entertain your counter-arguments in the comments section and thank your for your readership.
One thought on “Why The Mass Media Cannot Name The Inflation Culprit”
No, Richard, you are not wrong. I must admit here are some of your reasonings that I didn’t understand (I’m just to uneducated in some of the things you talked about ) to comment but I have been looking at my country for the past two plus years and shaking my head at how unbelievably spoiled it has become. When we can’t have exactly what we want when we want it we are just beside ourselves with “Oh, poor mes”. The pandemic was/is horrible but it has brought out what a “me” people we are. Also, what an unimaginative people we are now. “Oh, my goodness, we are going to have to stay home ~ what on earth will we do with ourselves, our children and our husband?”.
I won’t go on. If I did this would be almost as long as your article.
You’re not wrong!!!!
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