That Excuse for Greed that We Call Inflation
There is one sure thing that can be said for inflation: it always benefits the rich and always disadvantages the middle class and poor. That’s ‘Freeman’s Law’ and I hereby permit you to call it that if you wish.
Inflation is supposed to make everything more expensive to buy—and it does that—but here’s why it cripples the middle class and destroys those living in poverty. In order to explain that, some comparisons must be made.
1) All humans, both wealthy and poor, need food, shelter, clothing, warmth, safety and that’s where that part of the equation stops. For the poor that takes all the money they have, for the middle class a little less of what they have and for the wealthy its not even on the menu.
2) Next up is a decent job, education, healthcare and transportation to work. The poor are pretty much out of that equation, the middle class are okay (but only barely) and loss of a job or a major health issue puts the at the edge of bankruptcy and/or homelessness. If you think that’s unlikely, Forbes says “63% Of Americans Don't Have Enough Savings To Cover A $500 Emergency.”
Obviously, the wealthy aren’t subject to either 1) or 2) and by wealthy I’m not referring to billionaires. They get enough flack without taking it on the chin in this conversation. By ‘wealthy’ I mean those with family income over $200,000 per year. That’s 10 million out of 84 million families and the 84 does include the billionaires, does include the middle class and does include the poor.
Anatole France, a French poet, journalist, and novelist and winner of the Nobel Prize in literature, said “The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread.” He said that a hundred years ago and it is as true today as then. I’m quite fond of the quote.
So, we can gather from those statistics that a great many of the advanced economies of the world are in deep shit
There are a great many levers available to be pulled under these circumstances, but its impossible to pull them. One might ask why and it would be a very interesting question to consider.
We have been told it is the great surge of purchasing after the constricted years of the Covid pandemic, which is a lie. The pandemic tested every working person’s ability to survive financially, so where’s the purchasing power in that? We have been told it’s the war in Ukraine, but Putin’s threats to withhold European gas are little reason for oil prices to skyrocket. Oil and gas prices are controlled by a worldwide cartel and, at least in the United States, cartels are against the law.
So who profits and who loses by levers not being pulled?
Certainly the oil and gas cartels profit, as well as electric companies who are energy producers as well and eager to jump on any bandwagon at hand. “Natural gas prices rising in US, dampening hopes for lower inflation,” blares the Guardian UK newspaper. It goes on to say, “The price of natural gas in the US has risen by nearly half in the past month, as drought and the war in Ukraine continue to bite and millions of Americans turn up their air conditioners in a heatwave.” What a crock. The U.S. is swash with gas and there is no reason in the world for a 50% increase in a month. We used to have levers. Profiteering is a lever. But the American consumer swallows all that bullshit about air conditioners and drought and war in Ukraine.
None of that is inflationary and none of it is a cause for punishing costs carried forward to the consumer. There are no punishing costs. If you look at quarterly profits for any and all oil and gas producers you see evidence of greed that puts Wall Street to shame: ExxonMobil has announced an estimated second-quarter 2022 earnings of $17.9 billion, a record quarter for the company; Chevron today reported earnings of $11.6 billion for second quarter 2022, compared with $3.1 billion a year ago and ConocoPhillips announced second-quarter 2022 earnings of $5.1 billion, compared with $2.1 billion a year ago.
Yet you and I as taxpayers subsidize oil companies by as much as $4.8 billion a year. They thank us at the gas pump by $6 a gallon gas and diesel, lying to us about the reasons.
The Case for Price Controls in the Energy Industries
It’s been done before, during both world wars and during the depression that followed the ’29 stock market crash. In 1971, President Richard Nixon issued an executive order pursuant to the Economic Stabilization Act of 1970, imposing a 90-day freeze on wages and prices. The constitutionality of the order was challenged and upheld in the case of Amalgamated Meat Cutters v. Connally.
But cartels (consortiums of independent organizations formed to limit competition by controlling the production and distribution of a product or service) are against the law I America. And it’s no accident that the pump price of gas and diesel varies only a few cents across brands. It’s also within the powers of the government to declare excess profit taxes on companies that so egregiously rip off the American consumer.
One step further would be to nationalize the energy industries
When you stop to consider the provenance of the oil, gas, coal, copper, iron and other elements that are to be found under our American lands and the 200 mile range of seas that surround us, who really owns them? Are they not the property of the American citizens, including native Americans?
Take Sovereign Wealth Funds as an example. Many nations have them.
Unfortunately, it’s not in the interests of the wealthy to fight inflation
It’s no surprise that rich people own more than poor people, but those of us who are not rich may not be aware or pay attention to what that actually means in good times and bad.
In good times we all do a little better and the rich do fantastically well. That’s okay with most of us, as long as we can pay the rent or the mortgage, keep the kids in school and take a holiday once in a while. What we may not realize is how fantastically well the rich do when things go to hell.
Inflation puts people of ordinary means pretty much against the wall. Rents increase, and that’s tough, but the landlords are coining money. Cars become out of reach but, for the dealer, that old Ford in the corner of the lot with the broken taillight just gets more profitable every week. Your and my house is worth more in inflated dollars, but the hundred million in a rich man’s several homes is a money pump. How often do we read of a NYC penthouse bought for $5 million a few years back and sold for $21 million last week?
In 2008, when the financial world fell apart, the rich took their losses off their taxes and we lost our homes. You might have noticed that since 2008 we ordinary folk have barely recovered, while the banks and Wall Street coined money.
So the wealthy have a kind of protected seat at the American financial table and the rest of us serve the courses and pour the wine. It’s heads they win and tails we lose.
If that sounds like a call to barricades and pitchforks against the wealthy, it’s not
I rather like most of the wealthy people I’ve known in my life. But I know, as they know, that things have gotten out of hand over the past half-century and we need to take a more equitable look at the society we built during those decades. We have too many homeless on the streets, too many families with both parents holding multiple jobs and too exhausted to be kind to their kids.
Everyone is worried and buying a gun.
Is that how we want it to be? Perhaps it’s time to think about that.
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