The post on inflation I can't write for work

 I'm learning so much about finance from my job. However, since the financial advice I write is mainly for rich people who might need someone to manage their accounts for them, not poor people I want to radicalize into socialists, there's stuff I can't really address.

Inflation is really bad right now; it's the worst it's been since the 80s. Naturally this is bad in a lot of ways. It means that rent and food and transportation and healthcare are all more expensive than ever, but since wages lag inflation, you're probably still getting paid about the same. Meanwhile the money in your bank account is also worth less than it was. If you're really rich, you can get around this by investing your money at rates above inflation. But that's not normally something you can do if you don't have a pile of extra money lying around.

People have been asking what causes inflation, and mainly they seem to want to blame the president. Which is odd because we don't live in a country where presidents are permitted to set prices. Still, I have to admit that extra tax credits and stimulus have contributed to the price increases.

Here's how it works. Say a loaf of bread costs 50 cents to make and you can sell it for a dollar. If you sell it for more than a dollar, people aren't willing to pay that much for it, so you actually make less profit than if you keep the price at a dollar. Well and good.

Trouble is, people need to eat bread. So if all your competitors and you hike the price of bread at more or less the same time, people will still buy it even if it's $5 a loaf. Because they have to eat, and presumably you've hiked the price on all the other food you sell too.

Demand here is inflexible so prices can skyrocket--with one small check. This is that, if the price goes up enough, a certain number of poor people can't buy it no matter how much they want to. They go hungry rather than buy the bread. Now you're losing profits, so you grudgingly have to lower the price again. Low prices are generally good. Some very poor people still can't afford the bread though. You'll drop it to the point that most of your customers can afford the bread. Nobody's actually interested in making sure every single person can afford their product, just that they can sell enough volume to make a good profit.

Imagine, though, that the government realizes some people are going hungry, because they can't afford even a dollar a loaf. So it subsidizes food for the hungry, either by food stamps or straight-up cash.

Immediately demand goes up, and you (you're still a baker in this metaphor) sell a lot more. And you think, hey, with demand like this, maybe I can hike the price! So you hike it a little, and a little more, until demand drops off (some poor people cannot afford your bread). Then you've reached the sweet spot when you're making the most profit on bread you can.

It's safe to say, then, that providing for the poor causes inflation. It will always do that, because as long as suppliers are seeking only their own profit, the more money you provide to consumers, the higher demand will be, and the prices will go up.

This has happened with education. Easy-to-obtain student loans > most people can afford to at least try college > college prices go up. Now everyone's crushed by debt and all, but the profit margin is great. If we subsidize college more, prices will simply go up more. There is no reason for them to ever stop increasing prices until the point at which people stop buying the product. The price will always be set at a number some people can't afford.

And healthcare. Healthcare has very inflexible demand, because nobody likes dying. And so you can see the prices increase and increase; they don't stop increasing because sick people never stop buying healthcare. They will only stop increasing at the level when a significant number of people can't afford to buy it and die instead.

And rent, of course. And houses for sale. The costs go up and up and up, and we are all squeezed tighter and tighter, trying to pay for it. A certain number will not be able to do so, and we have homeless people. We have to have homeless people, to demonstrate we've reached the maximum price for the demand. A certain group of people do not even want there to be anywhere for homeless people to live, because if there is a painless option besides paying a thousand a month to a landlord and accepting a terrible job to pay for it, people will take that option. There has to be punishment for people who don't grind hard enough.

There is, of course, competition, and that helps. If someone wants to carve out a niche as the budget option, they can do so. (Much as I hate Walmart as a company, they make it possible for me to dress my children so I'm not going to say I'm not grateful.) But, in general, there's not enough competition. I heard from a guy on twitter the other day who lives in an area with only one grocery store. Bread there is $7 a loaf. Because when you're a monopoly you can do that. Here where I live, I've been able to reliably get bread for 60 cents, because we have quite a few different stores.

In this country, most things are provided by a very short list of companies. If they all agree-- either explicitly, or simply by watching each other's prices-- they can easily drive prices up and wages down. Take publishing. Since there are only five major publishers, there isn't a lot of competition for any book you want to sell, and advances get smaller while fringe benefits vanish. Likewise if the only department stores in your region are Target and Walmart, Target can set its price fairly high and all Walmart has to do is set theirs just a little bit lower to still be the budget option.

So, is it true that if we raise the minimum wage to keep up with inflation, it will cause more inflation? Probably, yeah. 

I still think we should do it, though. Because I would rather run a race trying to keep up with inflation than simply let a huge number of people fall further and further behind.

But I think we're eventually going to need some longer-term solution. Anti-trust enforcement is a big  one we haven't done enough in a long time. But I'm open to hearing more ideas. I know that division of wealth was once a lot more balanced in this country, and that there are countries where you can flip burgers for a living and still own a house. So it shouldn't be impossible.

But first, I think, we're going to have to want to. And there are a million and one reasons why people don't want that at all.