Dear, oh dear.
The president tweets:
Let me be clear to any corporation that hasn’t brought their prices back down even as inflation has come down: It’s time to stop the price gouging. Give American consumers a break.
Some prices included in corporations’ costs may have come down. In most cases, the large majority will have not, and, if their businesses are to flourish, those increased costs will still have to be passed on. Disinflation (which is where we appear to be for now) is about a fall in the rate at which prices rise. That’s different from deflation (which is when prices fall).
Inflation is a change in the price level. Inflation slowing but still positive doesn’t bring down prices, it brings them up less quickly. Math is hard.
It’s also important not to forget how compounding helps embed higher prices. Taking simplified numbers, imagine a situation when, thanks to 5 percent inflation, the price of a good rises from 100 to 105 by year’s end. If inflation eases to 3 percent the next year, that’s better news, but (and one really should not have to spell this out), the 3 percent will be 3 percent of 105, not 100.
With Elizabeth Warren busy taking on the supposed threat of Big Sandwich, I thought we had reached peak demagoguery for the week. Apparently not.