Are 'Greedflation' and 'Price Gouging' to Blame for Rising Prices?

Editor's note: In this week's Empire Financial Daily Weekend Edition, our friend and colleague Nomi Prins from our corporate affiliate Rogue Economics is back... During her time on Wall Street, she worked as a managing director at Goldman Sachs, ran the international analytics group as a senior managing director at Bear Stearns in London, was […] Not rendering correctly? View this e-mail as a web page [here](. [Empire Financial Daily Weekend] Editor's note: In this week's Empire Financial Daily Weekend Edition, our friend and colleague Nomi Prins from our corporate affiliate Rogue Economics is back... During her time on Wall Street, she worked as a managing director at Goldman Sachs, ran the international analytics group as a senior managing director at Bear Stearns in London, was a strategist at Lehman Brothers, and was an analyst at the Chase Manhattan Bank. However, Nomi eventually left Wall Street behind – becoming an investigative journalist to shed light on the ways financial systems are manipulated to serve the interests of an elite few at the expense of everyone else. In today's essay, she dives deeper into the concept of "greedflation"... --------------------------------------------------------------- Are 'Greedflation' and 'Price Gouging' to Blame for Rising Prices? By Nomi Prins --------------------------------------------------------------- [Is This the Most Shocking Financial Story of 2022?]( This disturbing plan by our country's elite could disrupt more than $37 trillion in retirement funds. [Click here to find out if your money is in danger](... --------------------------------------------------------------- 'Greedflation'... The term has recently caught on to explain the out-of-control prices U.S. consumers are facing. We all know that inflation has rocketed this year. We're paying, on average, 8.5% more for our purchases this year than we paid a year ago. This has taken a harsh toll on all our budgets. And America's middle class, the economic backbone of this nation, is cracking under pressure. As many as 75% of middle-class households recently reported that their income is lower than the cost of living. It's gotten to a point where some 20 million homes across the country – about 1 in 6 American homes – are falling behind on their utility bills. Now, trade disruptions and increased costs along the supply chain are significant factors in rising prices. But the greedflation argument maintains corporate greed and price gouging are also to blame. See, while regular people struggle to make ends meet, many large corporations have been raking in record earnings. So in today's essay, I'll explore this argument in greater detail. I'll also show you some ways you can level the playing field. --------------------------------------------------------------- Recommended Link: [This could literally save your retirement]( The man CNBC called "The Prophet" says he'd put 50% of his kid's college fund in this stock. [He reveals the name and the ticker symbol here](... --------------------------------------------------------------- Let's start with a quick recap... The original – and correct – meaning of inflation is an increase in the supply of money. In other words, it is, in fact, an increase in the money supply that causes prices to increase. That's because there's more money chasing the same number of goods. The Fed's broadest measure of the money supply, called M2, rose by an astonishing $3.8 trillion in 2020. That was a one-year increase of nearly 25%. That was followed by a further $2.3 trillion in 2021. Fast-forward to 2022, and the inflation chickens have come home to roost... aided by global supply chain disruptions and sky-high energy prices. Now, there are always people (and businesses) out there who will use the excuse of inflation to hike prices. That's just the reality. It's commonly called "price gouging." One example is credit-card companies. Earlier this year, Mastercard (MA) upped its transaction fees. That happened even though its net revenue for the first quarter was 24% higher than for the same quarter in 2021. But its costs haven't been badly impacted by supply chain issues or inflation. In fact, its operating margin was nearly 60% and its net income was up more than 44%. And its own Mastercard SpendingPulse report published in May showed total retail sales up 7.2% on the previous year. In-store sales were up 10.2%. And online sales were up 92% on pre-pandemic levels. Perhaps unsurprisingly – we've recently seen the whole "greedflation" argument become the point of political contention. On the one side, you have Republicans pinning the blame on the Biden administration. On the other, Democrats are complaining about price-gouging corporations. Whichever side of the argument you come down on, there's one glaringly obvious factor that continues to give it life – astronomical CEO pay... Compared with the average American worker, CEOs are earning 351 times more per year. Put another way, you'd have to work almost every day in the year to earn what a CEO earns in one day. Take a look at the chart below. You can even see a sharp uptick in their total compensation in 2020, when millions of Americans lost their jobs... and worse. From 1980 to 2020, the total amount CEOs are paid grew by 1,322% (adjusted for inflation)... The average American worker's pay went up just 17.5%. But it's been getting worse... According to a recent study, CEO pay at the 500 largest U.S. companies by revenue increased by 18.9% in 2021. Meanwhile, workers' real wages fell 2.4%. So why do bosses keep earning more while their workers struggle? I alluded to the reason earlier... and it's a simple one, really. Corporate profits are at an all-time high. Have a look at this next chart... In 2021, corporate profits after tax rose to $1,666 billion. That's a 60% increase from $1,038 billion in 2020. And CEOs are being rewarded generously. For example, Michael Miebach was appointed CEO of Mastercard in January 2021. He got a total compensation package of $16.1 million in his first year in the job. And Amazon's (AMZN) new CEO Andy Jassy received $212.7 million in total compensation last year. That's 6,474 times the $32,855 median pay the retail giant's regular employees get. Keep in mind that Amazon already hiked its fulfillment fees a couple of times this year. It's just one of many examples of a company expecting its retailers and customers to shoulder its rising costs, while richly rewarding its CEO for just doing his job. The pay gap I described above is a factor of 'The Great Distortion' I've been telling my readers about for a while now... The rich have been getting richer, while the average American has paid the price. But, as with many things in life, there are things you can do to try and level the playing field... Because if you know where to look, you can use the distortion to your advantage. For example, like I told you in a [recent essay]( if you stay invested in the stock market for 20 years or more, you won't walk away empty handed. One way to do that is with the Vanguard S&P 500 Fund (VOO). This exchange-traded fund ("ETF") allows investors to gain exposure to the price movement of the 500 companies in the S&P 500 Index. It's a straightforward investment you can access in your regular brokerage account. The fund doesn't try to outperform the index. Instead, it aims to replicate its performance as closely as possible. Regards, Nomi Prins September 10, 2022 Editor's note: Nomi says that a strange force is strangling the middle class... and this troubling trend is secretly creeping across the U.S. Simply put, she says that America's land of extremes is about to accelerate to something we've never seen before. In a special presentation, she explains how you can get on the right side of the widening gap in U.S. society – [watch it here](. --------------------------------------------------------------- If someone forwarded you this e-mail and you would like to be added to the Empire Financial Daily e-mail list to receive e-mails like this every weekday, simply [sign up here](. © 2022 Empire Financial Research. All rights reserved. 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