Precious Roy wrote:
Trump's tax plan caused many publicly traded companies to buy back their stock in order to boost share prices. This, in turn, caused people's investment portfolios to grow at a rapid rate. That created demand for housing, both primary residences and vacation/investment properties. Trump did nothing to actually follow through on promises to return jobs to middle American. So, all the major employment centers remained mostly in about two dozen large metro areas. Supply of new homes has been dwindling in these markets because these cities have sprawled out to their limits and gentrification of close in communities is almost exclusively high end development. Combine that with a complete lack of investment in public housing, and you get big time inflation in the housing market. In all fairness, Biden hasn't lifted a finger on public housing investments, repealing Trump tax breaks or trying to bring jobs back to small and mid sized cities that have never recovered from de-industrialization.
On the other hand, the remainder of consumer inflation is driven primarily by corporate monopolies and monopsony on the distributor level (meat packing industry, international container shipping, etc.). The lack of price competition has allowed corporations to use COVID supply chain issues as a pretext to raise prices well beyond what is necessary to recover increased costs related to oil prices and transportation prices (by the way, transportation costs are a good example of what happens without meaningful price competition. The cost to move a container of goods has risen from about $2k to $20K+. That additional $18k is almost all pure profit as increased energy costs and wages have had a minimal effect on pricing.). Trump had four years to do something on anti-trust and did nothing except complain about social media companies.
Finally, the current consumer inflation outside of housing is temporary. Just like during the Carter administration, inflation is caused by a temporary crisis. In Carter's days, it was the oil embargo. When OPEC lifted the oil embargo, inflation went away very quickly. US energy production will rebound in 2022 and supply chain disruptions will ease once we get out of winter.
https://mattstoller.substack.com/p/corporate-profits-drive-60-of-inflation
Thanks Roy for explaining what I could not. You obviously have solid knowledge in the area.
To add to what you said about housing: From the WSJ, 1 in 7 homes are currently being purchased by Wall Street investors. Due to this, starter home prices are rising 7% faster than renter incomes. The typical renter now needs approximately 27 years to save the 20% needed for the down payment on a median priced home.
The squelching of the American Dream of home ownership is getting more and more remote for most young Americans, yet we have people spewing incoherent rhetoric they heard on Faux News like a few posters here.