Consumer Safety & Awareness Part 32

Advertising Scams
(Part 6 – Deception Through Inflation)

Investor’s World defines “inflation” as “The overall general upward price movement of goods and services in an economy, usually as measured by the Consumer Price Index and the Producer Price Index. Over time, as the cost of goods and services increase, the value of a dollar is going to fall because a person won't be able to purchase as much with that dollar as he/she previously could. While the annual rate of inflation has fluctuated greatly over the last half century, ranging from nearly zero inflation to 23% inflation, the Fed actively tries to maintain a specific rate of inflation, which is usually 2-3% but can vary depending on circumstances.”

Even with that definition, and the many others available to us, economists argue over what it really means, what causes it, and how to fix it (assuming there is a need to).

In An Analysis and History of Inflation, Don Paarlberg states, “Consumers blame food processors and distributors for price increases that result from inflation. Likewise, increases in rent are attributed to greedy landlords. Manufacturers who raise prices are accused of profiteering, even when they may be losing money.”

He goes on to explain that inflation is actually caused by the government’s continuous increase in the amount of money available – the more money, the less it is worth, and the more (in terms of the American dollar) things will cost.

Many consumer advocates, though, including myself, feel that in some cases manufacturers and merchants do artificially cause price inflation in order to increase profit. The case for this was made by WalMart’s demand this past winter that its suppliers lower wholesale prices or they would switch to less expensive brands, including their own house label. If the rapid rise in food and household good costs was out of the control of the manufacturers, shippers, and others involved in the production end, WalMart, the leading brand in price management, would not have made the demand. To back up that possibility, it was reported that within a few weeks more than half the suppliers did roll back prices, some considerably.

Others blame the theory of Supply and Demand as the cause of inflation – not only is the population increasing, thus causing more demand, nations that previously had little need for luxury products are now clamoring for them. Opposing that is the ever-increasing efficiency of manufacturing and production. Increases in demand are frequently offset by greater production per acre (which is offset by fewer acres being dedicated to production). Increases in demand are offset by more efficient production methods and the use of new material (which is offset by a decline in availability of raw material).

Mr. Paarlberg also comments, “The logical way to deal with the problem of inflation is to stabilize the value of money, in which case both inflation and deflation would disappear, and their inequities with them. It is understood that the way of doing this is to limit the issue of money. But such a course would require more discipline than the public and public officials worldwide have been able to muster. There are those who have vested interests in inflation, and others who gain by deflation, so none of the various proposals for stabilizing the value of money has been found acceptable.”

This, though, does not take into account the growing desire by managers and stockholders for greater salaries, dividends and benefits.

There is one pressure that consumers can bring forth to fight artificially induced inflation – stop purchasing those products whose prices have artificially increased. Look for sales, purchase store brands, compare prices from store to store.

There are nine supermarkets within 12 miles of my house. This week one is selling green seedless grapes for 89-cents, one has 99-cents, and another $1.29. The remaining are all charging $1.99 to $2.99 a pound. One has the audacity to advertise their $2.49 price as a “sale.” If you purchase grapes at any of the higher-priced stores you are fostering artificial inflation.

During any week, anywhere in the country, you will find similar discrepancies. Until the consumers of this country become better education and act with knowledge, deception through inflation will remain with us.