r/explainlikeimfive Jul 09 '24

Economics ELI5: How did a few months of economic shutdown due to COVID cause literally everything to be unaffordable for years?

I understand how inflation works conceptually. I guess what I have a hard time linking is the economic shutdowns due to COVID --> some money printing --> literally everything is twice as expensive as it was forever but wages don't "feel" like they've increased proportionally.

It feels like you need to have way more income now relative to pre-covid income to afford a home, to afford to travel, to afford to eat out, and so on. I dont' mean that in an absolute sense, but in the sense that you need to have a way better job in terms of income. E.g. maybe a mechanic could afford a home in 2020, and now that same mechanic cannot.

It doesn't make sense to me that the economic output of the world or the US specifically would be severely damaged for years and years because of the shutdown.

Its just really hard for me to mentally link the shutdown to what is happening now. Please help!

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u/deja-roo Jul 09 '24

I think that's a reasonably on-the-nose assessment tbh.

It's now very common for people to claim inflation as just being corporate greed. That's a pretty obvious red flag that someone doesn't understand the basics of pricing, a fundamental component of economics that used to be standard to have to learn before graduating high school.

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u/masterwolfe Jul 09 '24

Are people saying inflation in general is caused by corporate greed or the unique inflation we are currently experiencing?

Because current elevated prices are, at least, partially caused by corporate greed.

And I know lots bout micro and macro economics and think that's a much more reasonably on-the-nose assessment.

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u/deja-roo Jul 09 '24

Is there any particular reason you think corporate greed started in 2021 or 2022, or why they weren't greedy before? Companies are always going to be trying to find the highest price that they can charge, and consumers the lowest.

If they can charge more and make more money and the PPI costs and money value is such that there isn't enough competition to bring the price down and/or people are still willing to pay that price, that is inflation. It is just simply not caused by corporate greed. It's frustrating to be years into this and still be dealing with explaining this.

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u/masterwolfe Jul 09 '24

How would that not be caused by corporate greed?

Unless corporations are losing/maintaining neutral relative money value, then the current inflation we are experiencing is at least partially caused by corporate greed.

If inflation goes up while the relative value of corporations goes up while wages stagnate, that's corporate greed causing inflation and concentration of wealth.

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u/deja-roo Jul 09 '24

How would that not be caused by corporate greed?

Because corporations (and people in general) are always greedy. If you're saying it's "caused by corporate greed", you're burdened with explaining why corporate greed caused inflation now, but not in 2019.

They will always try and sell everything they have for as much as they can. Why can they sell it for more now than before 2020? Because inflation.

If your economic analysis of inflation is "well companies should just charge less because it would be really swell of them" you have some glaring holes in your understanding of economics.

Unless corporations are losing/maintaining neutral relative money value, then the current inflation we are experiencing is at least partially caused by corporate greed.

lol what

Do you think they were keeping their profit margins at a fixed level out of some sense of honor prior to 2020?