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Inflation and the Profit-Price Spiral

Inflation and the Profit-Price Spiral

Update: 2023-05-1218


Economists say that inflation is just too much money chasing too few goods.

But something else can make inflation stick around.

If you think of the 1970s, the last time the U.S. had really high sustained inflation, a big concern was rising wages. Prices for goods and services were high. Workers expected prices to be even higher next year, so they asked for pay raises to keep up. But then companies had to raise their prices more. And then workers asked for raises again. This the so-called wage-price spiral.

So when prices started getting high again in 2021, economists and the U.S. Federal Reserve again worried that wage increases would become a big problem. But, it seems like the wage-price spiral hasn't happened. In fact wages, on average, have not kept up with inflation.

There are now concerns about a totally different kind of spiral: a profit-price spiral. On today's show, why some economists are looking at inflation in a new light.

This episode was produced by Sam Yellowhorse Kesler and engineered by Katherine Silva, with help from Josh Newell. It was fact-checked by Sierra Juarez and edited by Jess Jiang.

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Comments (2)

Nate Flippin

The Fed and congress is by far the main reason for inflation. They increase spending exponentially every year. They introduce more dollars chasing after the same amount of goods. The reason companies expected inflation was because of reckless spending from the federal government.

May 13th
Reply (1)








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Inflation and the Profit-Price Spiral

Inflation and the Profit-Price Spiral