Supply chain theory of inflation

The podcast episode explores the supply chain theory of inflation, which suggests that price increases are influenced by disruptions and bottlenecks in the supply chain. This theory emphasizes that when businesses face biophysical stressors or external shocks like energy price hikes or natural disasters, they may be forced to raise prices due to increased costs or scarcity of inputs. These price increases propagate through the supply chain, affecting downstream businesses and leading to a general rise in prices. The theory highlights the interdependency of businesses and the importance of understanding supply chain linkages when analyzing inflationary trends.