What is the Real Cause of Inflation?

Prices are rising—but who’s really to blame? This episode cuts through the noise to expose the real drivers of inflation: corporate greed, supply chain breakdowns, and power—not just “too much money.” We explain why raising interest rates hurts working people most, and how inflation is often used as an excuse to cut public programs. A must-listen for anyone confused or frustrated by today’s economy.

Keywords: what causes inflation, inflation explained simply, corporate greedflation, Federal Reserve interest rates, supply chain inflation, economic justice, cost of living crisis, working class economics

Transcript

Let's talk about something everyone feels, and you hear about constantly online and in the media. But almost almost nobody really understands inflation. The groceries that used to cost $60 now run you over $100. Your rent's gone up. Gas is ridiculous. And somehow, even eggs are a luxury item. And what do you hear? Oh, it's the consumer's fault. They want avocado toast, or there's too much money in the system, lowering its value and driving up the costs, or you got a stimulus check, and now we all have to suffer. That always seems to be the story, but it's wrong. What if prices are rising, not because you've got a few hundred bucks in aid, but because CEOs sell an opportunity to cash in? Here's what you don't really hear on the news. In 2021 and 2022, giant corporations like Procter and Gamble, PepsiCo, and Nestlé, all bragged to their investors about rising prices beyond their costs. And that, while prices were sky high, supposedly because of COVID, corporate profits hit record highs, meaning that while you were forced to tighten your belt, a good deal of those higher prices were just extra profit for the owning class. This isn't inflation caused by too much money. It's inflation caused by too much power. Welcome back to American Socrates. I'm your host, Charles M. Rupert. In today's episode, we're going to dig into what actually causes inflation, how prices get set, who benefits when they rise, and why blaming working people for inflation is one of the oldest scams in the book. Because if we're serious about building an economy that works for all of us, we need to stop buying the story that's been sold by the rich and start asking what's behind this script. Let's start with the textbook definition, but without the really heavy economic jargon. Inflation is simply when the overall price of things goes up, across the whole economy, so that your money buys less than it really used to. It's literally the same thing as saying the value of your money has gone down. A dollar just doesn't buy what it used to buy. Inflation isn't just one thing. There are different types of inflation caused by different forces. And if we don't understand those differences, it's easy to get manipulated into blaming the wrong things. So let's break inflation down into three major kinds. The first is what we call "demand-pull" inflation. It's the version that you hear about the most, especially from politicians and TV economists. It happens when there's simply too much money chasing too few goods and services. In other words, if suddenly everyone has extra money to spend, but the supply of goods and services hasn't changed at all, prices go up. Like, if you got a million dollars overnight and so did everybody else, that would cause prices to go up because there's not any new housing or new buildings or new jobs. It's just that everybody has exactly the same amount of extra money now. And so it's just going to inflate the number. COVID stimulus checks were blamed for rising costs during the pandemic because consumers received too much money and weren't working at the time to produce any new goods or services that they could actually use to buy. as a result, prices just went up. And yes, this did inflate prices, at least a little, but not nearly as much as we've been told, because the truth is most of the inflation did not come from this kind of working-class spending. The second kind is "cost-push" inflation. This happens when the cost of making stuff goes up, for whatever reason, and businesses ultimately then pass those costs onto consumers. If the cost of aluminum suddenly doubles, then soda companies are going to have to pay more to get cans. If people still want to buy soda and cans, then the cost is going to be transferred onto them. Again, COVID caused massive supply chain issues. Shipping containers got stuck, factories shut down, gas prices dropped, but then spiked after layoffs. All that increased the cost of production and transportation for these goods. And so it pushed prices up. And those costs got added onto the final price tag. But again, that's only a small part of the picture. The third and final kind is price setter inflation. This is the one that the owning class really doesn't want us talking about. A lot of today's inflation didn't come from natural forces of "demand pull" or "cost push". It came from corporate pricing power; big companies, especially in food, fuel, and housing, have the power to raise prices just because they can, not because their costs went up, not because there's too much demand, but because they face little to no competition. And they know that you'll pay rather than do without. This is the inflation caused by market power, not by market forces. This version rarely gets mentioned on cable news because it blames the people who actually set those prices and who it so happens sponsored those TV shows. So now that we've broken down what inflation really is, let's look at deeper COVID and corporate profits to see how this plays out in the real world. First, I want to zoom in and on what actually happened during the pandemic. Yes, there were real disruptions. Their factories shut down, supply chains collapsed, and energy markets flipped around. That's real "cost-push" inflation. But while everyday people struggled with job loss, rent, and skyrocketing grocery bills, corporate profits skyrocketed. Inventory was sold off for high prices while workers were being laid off, ultimately lowering the costs. And it wasn't just a coincidence. Major companies didn't just pass on higher costs. They jacked the prices up far beyond what they needed to cover. They saw COVID as an opportunity. People expected the prices to go up during the pandemic. And so, CEOs used the moment to raise them even more. And they were kind of open about it. Here are some actual quotes from earnings calls with investors in 2021 and 2022. In Procter and Gamble, which has the household brand names like Tide and Pampers, "we've been able to successfully pass on pricing, and in some cases, we've gotten a little bit ahead of our cost increases." PepsiCo, which owns Pepsi, Fritos, and Quaker Oats, said, "Our brands are strong enough that we can price through inflation, and we're going to continue doing so." Nestlé, you know, the largest food company in the world who also poisoned Flint's drinking water, they said, "we took pricing up early, and we took it up strong, and that's contributed to very solid top line growth." These companies were not struggling. They were celebrating rising prices because it meant record profits. Meanwhile, you were being told you're going to have to cut back. You're going to have to shorten your budget. You need to stop complaining. This is what economists call greed inflation. It's inflation driven by profit-taking, not by economics. And they got away with it because the people who actually set prices are accountable only to shareholders, not the public. It's legal. It's unstoppable, even though it's probably unethical. The bottom line here is inflation didn't just happen during COVID, or because of it. It was engineered, but corporations with the power to exploit a public health crisis and blame working people for that. Whether it's for getting stimulus checks or for asking for better wages, this is one of the oldest tricks in the book. I want to turn to now and ask a kind of obvious question. If this kind of inflation is driven by market power and not by spending, then why do we keep hearing that it is our fault? Well, no one seems to be blaming companies for setting these prices. No one points at the investors demanding record returns, and no one dares challenge the system that allows essential goods to be controlled by a handful of private actors. Why? Because the dominant story about inflation, the one we're told by everyone, central banks, mainstream economists, and media pundits, is designed to protect capital and to discipline labor. Let's walk through how the fight against inflation actually plays out and who ultimately pays this price. Step one is always to blame too much demand. Whenever prices start to rise, the first thing you hear from politicians and economists alike is that there's too much demand in the economy. That sounds really technical, but all it really means is you're able to spend too much money. In their eyes, the problem isn't that corporations raised prices. It's not that housing costs are through the roof or the oil companies are profiteering. No, no, no. The problem, they say, is that you got to raise or a stimulus check or breathing r for the first time in years. So what's the solution they propose? They want to claw back the money right out of your hands to force you to shrink your budget, to make your life harder. That's what they call cooling off the economy. But what they're really cooling off is your ability to spend money. I don't want you to think about this for a second. I mean, most of us would say we'd like to get a raise. We'd like to be making more money. But what happens when we actually get that as a group, like working people? When everybody gets more money, when we all start working and making more, it's blamed as a kind of inflation. And so corporations are simply allowed to raise prices, do whatever they want to get more of that money. Landlords raise rent, corporations raise prices. Step two is to raise interest rates. Once you've been blamed for inflation, the next step is for the Federal Reserve to raise interest rates. Now, what does that actually do? It makes mortgages, car loans, and credit cards all of that more expensive. It discourages businesses from investing or in hiring. It pushes small businesses towards the edge, and most importantly, it slows job growth, or in some cases, kills jobs altogether. Why does the government want to do this? Why do the private banks want to do this? Because when people are out of work, they stop spending. This is a kind of forced austerity. When you stop spending, demand drops. And when demand drops, prices might stop rising. That's the theory, anyway. But we now know that it ultimately depends on what the actual cause of inflation was. What we do know for real is that it's economic pain on purpose. You are being forced to spend less, not by saving money or by choice, but by losing your job, having your hours cut, reducing your raise, or your bonus. Something like that. It's not just one party or another. It's a bipartisan default setting. The go-to response from both sides of the aisle here, when prices go up, is to make working people suffer more, all in the name of stability. But the real question is, does this approach touch the actual causes of inflation? Does it break up monopolies? Does it regulate corporate price setting? Does it stop landlords from jacking up the rent endlessly? And the answer is no. It doesn't touch any of that. Instead, what it does is tightens the screws on people with less room to move anyway. This system fights inflation by taking more from the people who already have the least. And they call it responsible policy. It's austerity in a nutshell. It's not economics as such. It's just a punishment of the working class by the owning class. And the sooner we see it that way, the sooner we can actually start to demand something different. Even the Fed chair, Jerome Powell, admitted in 2022 that the goal of the rate hikes was to, quote, "soften labor market conditions.". Translation being, he wanted to make people lose jobs so that they stopped asking for raises. That was the plan. Suffer more so that rich people can stay comfortable. I mean, I don't agree with Donald Trump on hardly anything, but he's not wrong that the interest rates the Fed currently has are too high, at least from the view of the working class. So the inflation story, we're told, is not about accuracy. It's about control. It keeps us looking inward and blaming ourselves, while the real price setters walk away with record profits. So if the inflation story we've been told is upside down, if working people aren't really the cause here, then what would it look like to fight inflation without making the poor pay the price? Well, we don't have to fight inflation by creating suffering. We can fight it by creating fairness. Let me walk through a few tools that could target the real causes of inflation and not just suppress demand, but reshape the system. First, price controls on key goods. That's one tool. When corporations abuse their power to raise prices on food, fuel, or medicine, the government could step in and cap prices at least temporarily. This is not messing with the market forces. Competition is supposed to be the market force that keeps prices down. But when businesses avoid competition in order to raise prices, it's the duty of the government to create a counterpressure to stop them from doing that. We've done it before during World War II and in the 1970s. It's not a magic bullet, but it works. when targeted and time-limited. If we can regulate electricity rates, why couldn't we regulate baby formula? Second, we could break up monopolies. Many of the worst price hikes came from concentrated industries, the meat packing industry, the tech industry, the shipping industry, housing. These are monopolies that give the companies the power to ignore market forces and set whatever price they want. The government must enforce antitrust laws. They need to support smaller producers and co-ops. When companies can't price gouge, inflation drops without hurting anybody, without hurting workers. Third, we could tax excess profits. When corporations brag about jacking up prices just to boost margins, maybe we should make them pay for that at above normal rates. An excess profit tax claw-back jacked up profits. Countries like the UK, Spain, and Italy have already tried this. It also discourages greedflation without hurting any kind of normal business activity. Fourth, we could increase public investment in supply chains. Some inflation was due to really fragile supply systems, especially in the housing market and the energy market, and in healthcare. We could invest directly in building public housing, more green infrastructure, and local food systems. That would ultimately reduce these kinds of bottlenecks so that scarcity issues can't be used as an excuse for future price hikes. Finally, we need to strengthen wages and worker power. Instead of suppressing wages to fight inflation, we could empower workers through job guarantees, union support, and labor protections. When people have power, the economy becomes more stable, not less. Inflation becomes easier to manage than when people aren't living paycheck to paycheck. So to sum all that up, a just response to inflation doesn't start by asking, like, how can we make poor people spend less? Instead, it asks, who or what is causing the problem and who should be made to stop doing it? And when we look honestly, it tends to be pretty clear. Working people often aren't the cause of inflation. So why are they the only ones being asked to pay for it? By now, it should be pretty clear. We're not just dealing with raising prices owing to market forces. We're dealing with a rigged story. It's a story about why these prices are rising in the first place. In the important question is, why don't we ever hear the full truth? Again, as usual, this comes down to power. The inflation story we're fed on cable news, and economics textbooks, the Federal Reserve Press Conference. It's written by the rich for the benefit of the rich. You should know by now that if we believe inflation is caused by stimulus checks, by other people having a payday, or by even public spending, then you're going to accept cuts to things like social programs that help you, that help your neighbors. You'll blame yourself for struggling, rather than the people who are literally price-gouging you. And we won't question these corporations, not their setting of prices or the system that protects them, or the politicians from both parties who shield them. But meanwhile, corporate media outlets are owned by the same interests, profits,iting from these rising prices, or, at the very least, they receive most of their revenue from those interests. Economists at elite institutions have the same problem. They're funded by banks and big businesses and big corporations, and are rarely impartial academics. And politicians on both sides of the aisle are more comfortable punishing workers than confronting capital. That's why the solution is always higher interest rates, which, of course, kill jobs, austerity, which guts the public sector, and personal responsibility, which shames you for doing what you have to to survive or thrive. It's never price regulation, corporate accountability, or any kind of redistribution of power, because those ideas challenge the deep logic of our system, and dep people who benefit from it. So you don't get the real story about inflation because the truth would threaten those in charge. And they'd rather you blame yourself than realize how much control you've actually given them over the years. So where do we go from here? I want to close this out with a vision of what it would mean to take back this story and fight for an economy that puts people before profits. Inflation is real, and it's not going anywhere. It's painful. It happens. We need to flip the script, though, on whose fault that is. The more we understand inflation, what it is, where it comes from, and who ultimately gains from it, the harder it is to be sold the same old punishment, disguised as sound policy, that we've been getting for at least the last 60 years. So, mostly, you just need to spread the word. Fighting inflation doesn't have to mean higher interest rates and lost jobs. It can mean breaking up monopolies. It could mean taxing as profits, and building public systems that make life just more affordable, on purpose. But to do that, we have to stop accepting the stories that keep us in our place and electing the sort of politicians that accept these false narratives. We need to develop healthy boundaries that we let no politician and no business cross, such as, we are not too expensive. We are not a burden on our economy. We are the economy. And when we make them understand that, when we stop asking, "Hey, what do we need to give up now, then we will finally become economically free." And perhaps for the first time. Thanks for tuning in to American Socrates. If today's episode of philosophy got you thinking in new ways, make sure to subscribe so you'll never miss an episode. New full episodes drop every Wednesday. If you enjoyed the show, leave a review. It helps others find us, and it means a lot. And if you know someone who could use a little more practical wisdom in their life, share this episode with them. Want more? Visit AmericanSocrates.buzzsprout.com for show notes, resources, and exclusive content. You can also follow me on Facebook, Blue Sky, or TikTok to keep the conversation going. Until next time, keep questioning everything.