Isabella says some of the economic forces that normally keep prices and profits in check can break down a little bit sometimes. She says really severe bottlenecks present opportunities for corporations to hike prices, she says. Isabella: In normal times, there's a fear that raising your prices can make you lose customers. But when there are bottleneck and shortages, isabella says that that competitive pressure becomes weaker.
Economists say that inflation is just too much money chasing too few goods.
But something
else can make inflation stick around.
If you think of the 1970s, the last time the U.S. had really high sustained inflation, a big concern was rising wages. Prices for goods and services were high. Workers expected prices to be even higher next year, so they asked for pay raises to keep up. But then companies had to raise their prices more. And then workers asked for raises again. This the so-called wage-price spiral.
So when prices started getting high again in 2021, economists and the U.S. Federal Reserve again worried that wage increases would become a big problem. But, it seems like the wage-price spiral hasn't happened. In fact wages, on average, have not kept up with inflation.
There are now concerns about a totally different kind of spiral: a
profit-price spiral. On today's show, why some economists are looking at inflation in a new light.
This episode was produced by Sam Yellowhorse Kesler and engineered by Katherine Silva, with help from Josh Newell. It was fact-checked by Sierra Juarez and edited by Jess Jiang.
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