@Captainant, you would like this article:
https://www.newyorker.com/news/persons-of-interest/what-if-were-thinking-about-inflation-all-wrong
To Weber, people like Summers were looking at the situation from the wrong side. The focus ought to be on sellers, not buyers. The pandemic had upended global supply chains, making it harder for corporations to acquire the stuff they needed to make their products. This should have squeezed their profit margins. Instead, as the economy began opening up, corporate profits were wildly outpacing growth in consumer spending power.
Here’s an example. Semiconductor chips are the basic building blocks for electronic equipment. When covid lockdowns and a string of temporary factory closures led to global shortages, the price of each chip began to rise, as did the price of everything else that used them. This proved especially troubling for the automobile market—a new vehicle can require as many as three thousand chips. As you’d expect, new cars got more expensive. So did the consumer alternative, used cars, which, in the first six months of 2021, jumped in price by nearly thirty per cent. But Weber argued that carmakers were raising prices far beyond what was necessary to cover the more costly chips. By 2022, the ongoing chip shortage had resulted in the fewest annual sales of new cars in more than a decade. Still, profits were up—car companies posted their best earnings in six years.
In a recent paper, Weber writes that the chip shortage established a “temporary monopoly” that allowed automakers to “raise prices without having to fear a loss in market share.” And it wasn’t just chips. Analyzing transcripts of company earnings calls, Weber concludes that firms in a variety of industries knew they could get away with gouging customers, who were already primed by the chaos of the pandemic to expect price hikes. Crucially, firms weren’t worried about losing customers to competitors; because of the supply bottlenecks, competitors would also be raising prices. Weber calls this dynamic “sellers’ inflation,” in contrast with the traditional model of inflation, in which an excess of consumer purchasing power is to blame.
The higher upstream the supply disruption, Weber has noted, the greater the ultimate impact on consumers. Raise the price of electricity or oil, for instance, and suddenly everything becomes harder to make or move. The same is true for chemicals, metals, lumber, or any of the basic commodities required to produce more complex products. If a government could somehow prevent the price of these magnifiers from getting out of hand, it could stave off inflation.