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The mystery of rising prices. Are greedy corporations to blame for inflation?
Inflation has been pushing prices up all year, but economists and politicians don't agree on where it's coming from.
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As it turns out, consumers might be the guilty party in the inflation mystery. We've at least been aiding and abetting. "Inflation is coming from demand," says Wolfers.
In spite of inflation, demand hasn't really blinked. Companies have been raising prices and we have been paying them. In fact, in many parts of the economy, spending has been rising right along with prices.
We're not necessarily buying more because we have more money, though. Our collective savings has been shrinking and household debt has been on the rise. It's possible we're spending money we don't have to keep up with rising prices.
That is likely not sustainable. And when our buying slows down, Wolfers says, companies will start lowering prices to entice us to buy: Prices will fall and inflation will ease. But, until demand drops, companies will push prices up as much as they can. It's elementary.