Why prices never return to the good old days


Like why can’t a head of lettuce go back to costing 1 cent?

Or, maybe more realistically, after dealing with crazy inflation for the last couple of years, why can’t prices just go back to pre-pandemic, pre-inflation levels, once the factors that *caused* the inflation in the first place have been resolved?

In: 5

Because no one will voluntarily take a pay cut even if you tell them prices of everything are dropping. We couldn’t go back to pre-pandemic times even if we wanted to since so many people have left the labor market which only drives prices up.

You never want deflation (negative inflation). High inflation is bad, *negative* inflation (i.e. deflation) is much worse.

Inflation is basically money becoming worth less over time, so deflation is the opposite. Money becomes more valuable the longer you sit on it. Logical conclusion, don’t buy stuff now, buy it later because your money will be worth more.
Nobody buys shit. Nobody wants to invest in businesses, or take a financial risk (because debt also gets more “valueable” over time). Deflation would wreak havoc, even compared to high inflation.

Do all the factors ever resolve though? If a truck isn’t available to take a shipment across the country, it backs everything up. I don’t know the current state of transportation affairs but I remember seeing a video awhile back talk about how many ports are backed up as we recovered from the height of the pandemic.

Also, during the pandemic, many fleet vehicles and ships were sold. That means after the pandemic, there are less ships and vehicles for transport.

If you’re running a store selling something for $5, if the costs drop, that’s more profit you. If people continue to purchase that item for $5, there is no incentive to lower the prices. If prices are high elsewhere for other things, that’s more incentive for you to keep your prices high so you can better afford those things with your profits.

Lastly, lots of the prices drops you’ve seen is because of extra supply. Extra supply doesn’t exist for everything. If a government or industry has lots of supply, prices will drop when those get added to the markets. If the government isn’t stockpiling things like lettuce, then those prices will be controlled by whatever those in the lettuce supply chain want to charge.

Deflation is even worse than inflation. We would stop spending money and our economy would crash.

The price you are charged at a store (or online) for a product is set by the retailer based upon covering quite a few expenses that they are juggling. The obvious cost is that retailer has to purchase the item you are buying either directly from the manufacturer, or sometimes they buy through a distributor who also raises the wholesale price a bit to cover their (the distributor’s) costs.

Additionally the price has to cover a number of other costs including:

* shipping (to the store or a warehouse)

* the cost to rent and operate that store or warehouse

* the salaries of their staff including the sales team, accountants, HR staff, workers who handle the actual inventory, etc.

* they have to cover losses from items that are spoiled (damaged during storage or shipment, etc.) or “shrinkage” (theft, either by a customer or an employee)

* Then there are a variety of taxes and fees that they have to cover. Some businesses have to pay for special licenses to sell certain products, etc.

* Overwhelmingly most businesses use debt to fund startup costs or growth, so they have to repay that debt with interest.

There’s probably several other costs involved that I’ve forgotten to mention, but you hopefully get the point that before the a retailer makes any profit they have to factor a lot of expenses into the price they set. While some of those expenses tend to fluctuate up and down, over all the costs involved to do business tend to go up. Even when one of these costs drops significantly, it often only has a modest impact upon the price that the retailer needs to charge to cover the other costs and turn a profit.