By William Haupt III | The Center Square contributor
"No private embezzlers or bank robbers in history
have ever plundered people's savings on a scale comparable to the plunder
perpetrated by the fiscal policies of leftist governments." – Ayn Rand
Former economic adviser to Barack Obama and international
economist Pippa Malmgren warned a group of investors that fiscal pump-priming
and extreme monetary easing used by governments and central banks can help
re-float weak economies. But there are major consequences. Flooding too much
money into economies too soon can be worse than their intent to avoid a full
depression.
While progressives stagnate growth with federal life
support, producers adjust and readjust as the money supply increases. The
ugliest word any government wants to hear nearing the midterms is
"inflation." Yet there are economic signals that indicate politicians
and central banks did too much. While politicians assure us there is no
inflation, the devil in the details everywhere is "shrinkflation."
For years, the government and the Fed have used complex
formulas to hide real inflation numbers. By ignoring the real Consumer Price
Index, they continue to fool some of the people all of the time. Yet the two
commodities that decimate consumer pocket books immediately are food and
energy.
For average Americans, the cost of food and other
consumables is their greatest weekly budgetary concern. People look under every
rock for bargains and grocers know this. According to a recent survey by
Dalhousie University, over 70% of shoppers say price is the top criteria when
deciding what to buy at the grocery store. That's why grocers and producers are
so obsessed with pricing.
"If you haven't been to a grocery store lately you
are in for quite a shock." – Mary Jo Handspree
The U.S. retail food industry is comprised of foods sold
at grocery stores, convenience stores, drug stores, and mass merchandisers.
There are a large number of small family-operated neighborhood stores and
independent grocers that serve local communities and rural areas throughout
America.
The size and sales volume of grocery stores varies dramatically
as well as their shelf prices. Small family-owned markets buy shelf stock from
a "cash and carry" so their shelf prices are higher. The major food
retailers own their warehouses; therefore their shelf prices are traditionally
much lower.
The Consumer Price Index tracks data that is readily
available from major chain stores and mass merchandisers. Yet the USDA claims
small independent grocers make up about 35% of U.S. food industry sales. This
has allowed the Fed and the government to deceive us about food-inflation for
years.
“Everyone is entitled to his own opinion, but not to his
own facts.” – Daniel Patrick Moynihan
Super Market Daily reports that most consumers think
supermarkets make huge profits on food sales. Yet grocery store profit margins
average about 2%. Grocers make their money on volume. Therefore, they only
raise prices when they have to because their wholesale prices are increased.
The cost of processing in the food sector is what drives
pricing at retail stores. Ingredients, energy costs, wages and benefits weigh
heavily on food manufacturers trying to cultivate relationships with grocers
and retain market shares. Profits are low and competition is high for the
consumer's weekly grocery dollars.
"I went back to work because someone had to pay for
the groceries." – Bette Davis
For years, to keep price points low, producers have used
package "downsizing" to avoid raising retail prices. They do this on
everything from chips, pasta, cookies and ice cream, to non-food items. Until recently,
producers did this in small increments to maintain brand loyalty and profits.
Since food and energy prices are based on
"futures" in commodity markets, when Biden slashed energy production
retail food packages started shrinking faster than Biden signed executive
orders. Recently, this has been taking place so often on every item on grocery
shelves, consumer groups have given this practice a name: They label the
biggest offenders "perpetrators of shrinkflation."
"Shoppers care more about price increases and less
about quantity decreases." – John Fitzer
Former Massachusetts assistant attorney general Edgar
Dworsky tracks the companies that shrink quantities without lowering prices on
his website, Mouseprint. He calls this downsizing, but that is just a more
mellow name than "shrinkflation." They are both deceptive ways
companies increase their prices. This has proven highly effective in increasing
profits and maintaining customer loyalty.
A recent Money newsletter revealed, "Consumers can
tell instantly if they're used to paying $2.99 for a carton of orange juice and
it goes up to $3.19. But if the container goes from 64 ounces to 59 ounces,
they probably don't even notice it – even though they are purchasing the item
more often."
Raising food prices to maintain profits is challenging
for national sellers when the government is to blame. A recent study by The
U.S. Food Institute estimates that over 4,000 grocery food products have been
downsized since 2012. This began after the Great Recession with Barack Obama's
audacious federal stimulus spending. Government is to blame but shoppers claim
that the grocer is the villain.
"Democracy is a process which people choose the man
who'll get the blame." – Bertrand Russell
When it comes to shopping and voting, consumers are
irrational creatures. They elect politicians who spend too much money that
causes inflation. When politicians claim there is no food-inflation and sizes
shrink and shoppers buy more for less, more often, they blame producers and
grocers?
Shrinkflation does not just apply to grocery and non food
items. It is everywhere; at supermarkets, home centers, big box stores and any
place you buy a packaged commodity. When consumers say this is "deceptive
and crooked," they never blame it on the stimulus check they got and
didn't need.
Politicians and the Fed point to increased buying trends
to rationalize bad money policies. Yet they do not account for shrinkflaton?
They use Common Core math and count "items purchased" rather than
"ounces sold" for the same price. This is how they can tell voters
that inflation is under control.
W. C. Fields told us, "Never give a sucker an even
break." Anything the government gives voters for free they pay for.
Government doesn't produce anything but misery. Producers, retailers, and
insurance companies continue to find backdoor ways to increase prices when
their cost of doing business goes up or the dollar falls in value. And people
blame them, not those that they elected?
Janet Yellen, Biden's leftist Treasury secretary, is
utilizing the same zero interest rates to finance Biden's spending spree that
she used to float Obama's weak economy when she chaired the Fed. So get use to
it. As long as shoppers get less for the same price, "shrinkfaltion is
inflation" no matter what they tell the voters.
“What is it about the government and its agents and
employees that they can lie to us with impunity, but we risk being sent to jail
if we lie to them?” – Andrew Napolitano
