Isabella (38:43): Yeah, I mean maybe to add to your list, we have also of course seen the European gas price cap is an international, I mean transnationally coordinated kind of price cap and the oil price cap against Russian oil, which I mean in principle could be for all oil, right? I mean just in terms of the technicality of the price control mechanism.
So yes, absolutely. It's been a totally astonishing to me. The reason why I wrote this article at the time was because I felt that the debate amongst economists was polarized between those who were saying like "Oh, we don't have to worry about inflation too much, it's just transitory." And those who were saying "Oh, inflation's really a problem, therefore we have to hike interest rates yesterday." And I felt like there was a position missing there, which is, yeah, we have very large price spikes and they're a problem. But if you have a fire in the kitchen, you don't set your whole house under the water, but you try to put out the fire in the kitchen, right? So not as an apologist of price controls, but to say, "hey, there is something sectoral that we can do." And direct means of price stabilization can be an emergency measure to buy time when you are faced with these kind of crazy price spikes.
Now the key word here I think is "emergency measure." And my sense is that the more urgent the emergency became, the more acceptable these kind of measures ended up being. And I think that in Europe you can see this very clearly in terms of the reactions to the war, but then also like basically as it became colder, right? And the fear of winter just became very real. The perceived emergency became more intense and the willingness to take these kind of measures became greater.
The seller's inflation story, I feel like is related but also kind of slightly separate in the sense that the price control debate is really about emergency measures that you take, right? And the sellers' inflation paper is really about how do we understand this kind of inflation.
But I think the shift that we are seeing now that of course is not complete and so on, but that at least it's becoming more acceptable to think about other ways of understanding how inflation came about, is kind of the first step that we need to take to move towards a different kind of economic stabilization paradigm that I personally think we really need in this age of overlapping emergencies.
So it's been quite a wild ride, but I guess talking today — and it has been very wild, so god knows what's going to happen next — it looks like there has been some movement in a good direction in the sense that the discourse is becoming more open. And I think that an open discourse is really what we need if we are faced with these unprecedented situations because you cannot respond to an unprecedented situation by saying "we have always known how exactly it works."
Cooked pork dishes for sale at a food stall in Beijing, China, on Thursday, Jan, 12, 2023.
BloombergEarlier this year, Odd Lots talked about the idea of companies taking advantage of bottlenecks and other disruptions to raise their prices. Since then, the notion of this type of corporate-led inflation has burst into the public discourse with central bankers and politicians all taking a closer look. But how does this type of inflation differ from more traditional economic interpretations of prices, and what are the implications for monetary and economic policy? In this episode, we talk once again to Isabella Weber, the UMass-Amherst economics professor who dubbed this phenomenon "sellers' inflation" in a paper published earlier this year. She talks about how the way we think about inflation is changing and her own experience of seeing public attitudes shift in real time. This transcript has been lightly edited for clarity.
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Hello and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway. And I'm Joe Weisenthal.
Joe, do you remember the episode we did, I think it was just a couple months ago,
with the Corbu strategist, Samuel Rines, about companies are telling us the real reason they're raising prices.
Yeah, a great episode that sort of helped me like analyze like corporate earnings calls from then on
and really like think about particularly in the consumer space where he had this thesis that companies are like very explicitly willing
to sacrifice volume expansion in favor of higher prices and higher margins. Right.
He called it price over volume. And since that episode, so we actually wrote an article based on that episode and we had a lot of quotes from Sam.
We also cited a research paper from an Odd Lot's favorite, Isabella Weber,
and we talked about this phenomenon, we called it excuseflation, So this idea that companies are using
all these one-off emergencies as an excuse to raise prices. But since then this whole idea has exploded
into the public consciousness in various ways under different umbrella terms.
So Isabella used the term sellers inflation. I've seen like profit led inflation,
greed inflation. Although I think that's a bad term for it personally, but it's everywhere now. Right, and it's funny 'cause it's one
of these things where, you know, economists are sort of like scandalized by sort of alternative ideas
about inflation and it's like they have certain things like some people say money supply, others say like labor costs and wages,
but like it feels like on Wall Street there's kind of less mystery. It's like no, they're like at least you know,
according to the people who read the calls, it's like no, they're telling us they're willing to push price.
And I guess the question is like, you know, well there's lots of follow on questions, but like I think there's some really interesting policy
ramifications from some of this identification. Totally. And it is funny, it's not, Pepsi isn't talking about like,
oh the money supply is increasing, therefore we're raising our prices. They're talking very explicitly about,
well we have these one-off reasons maybe to raise our prices and so we're gonna see how far we can take it to the consumer.
So anyway, everyone is talking about this, whether you call it greedflation, excuseflation, profit-led inflation, sellers inflation.
We need to go back to one of our favorite guests, who's done a lot of academic work on this topic.
We specifically cited her work in the piece that we did. We're gonna be speaking with Isabella Weber. I'm psyched, on set.
All right. Isabella Weber, economics professor at University of Massachusetts Amherst,
thank you so much for coming back on. Thanks so much for having me back and it's a true pleasure to be here in person.
Yeah, this is a treat. I didn't realize up until like five minutes ago that you were gonna be on set. I thought we were gonna look the video
so great to finally meet you. Oh, the first time we're actually meeting in person. Yeah, have you been surprised
at all by how quickly this seems to have become, I hesitate to call it mainstream 'cause people
are still debating it but it's in the "Wall Street Journal", it's in the "New New York Times", certainly in Bloomberg coverage.
Yeah, I think it has been very surprising, especially since some of the key data on the profit margins
actually already came out in the fourth quarter of 2021. So, and you guys have actually been covering
that at the time, you were covering the profit margin explosion that happened at the same time as inflation started to take off.
And in this by now probably infamous "Guardian" piece that I wrote,
I actually started by saying there is a so far pretty much undiscussed phenomenon,
which is an explosion of profit margins that coincides with inflation and we should take a closer look at that.
So I think in many ways when our paper came out at the beginning of this year,
it has kind of been something that had been going on for a long time and companies have been saying this on earnings
calls for a long time. The groundwork folks have been calling this out for a long time, but now it really took off, so.
So I guess one of my questions and have many is, you know, there are different factors that people talk about driving inflation
and obviously the tight labor market, fast wage growth, high levels of consumer demand,
a lot of the supply chain bottlenecks that we've talked about over the years on the show, the supply side factors, why is it important?
Let's start with that to sort of like think about correct identification of different causes.
Yeah, I mean when economists talk about causation, they have very, very high standards, right?
So I'm not yet there to say like what I did, it's like a causal analysis just to put this out there.
It's kind of a disclaimer, but I think this is kind of part of the challenge that we face because we are
in a really unprecedented moment in the world, in the economy, in the global economy, right? And inflation is kind of part
of that whole unprecedented moment. So you are getting these pieces of data that are coming out and you kind of have
to reason on them however incomplete the data might be. And if you just look at it from the perspective
of your standard inflation paradigm, then you basically just look at money supply, aggregate demand, and maybe wages.
And you don't look at all these other stuff that you guys have been reporting about for months and months and months, right?
But if you sit in a corporate boardroom, then you are actually looking at all this other stuff. So then from your perspective,
prices present themselves as something very different. So what we are doing with this research I think is
to kind of say let's take the information that we have, however incomplete it still may be,
and try to make sense why we are seeing what we are seeing. What we are seeing is that on earnings calls time and again
corporate leaders are saying that they can take pricing and that they can increase prices in ways
that they might not even have expected and that they can increase prices even when volumes are going down,
which is just against the logic of basic supply demand, right? Where we would expect with demand going up,
prices going up and not the other way around. Now you might say, well it's about the bottleneck and then demand
is strong so therefore it's still a demand kind of story. But then I would say, well if I look at the earnings
calls in the latest quarter, right? Where clearly the bottlenecks for the most part have ceased
and they're still taking price when volumes are going down, then clearly this is also not
a pure kind of bottleneck type of story. Well maybe just to step back for a second,
talk to us about what seller's inflation, this is the term that you use actually is
and how maybe it differs to traditional conceptions of greedflation,
because this is one reason I remember when we were writing that piece, Joe, this is one reason why I wanted to call it something other than greedflation
because it's not like everyone woke up in March, 2020 and suddenly decided to become more greedy.
Which is a common critique of like that. Yeah, and quite frankly, I think that everybody agrees on that.
Like no one is saying that there has been this sudden greedy impulse, firm leaders just became more greedy
than they used to be, right? That is just not a good theory. So the question is how can it be that in incredibly
concentrated industries we had decades of surprising price stability, right?
Even like deflation in some periods.
And now in this same highly concentrated kind of setup, we suddenly get this price
over volume type of pricing behavior, right? And what we are arguing in our paper
is that there's basically different components that coordinate price hikes in ways in which
they could not be coordinated without these emergencies happening, right?
So one prominent thing is a cost shock. I mean we have had gigantic cost shocks
coming out of energy, right? That kind of send a signal to firms, okay, now is the time to increase prices,
which means that they can be fairly sure that their competitors are also increasing prices because the way that they're pricing
is to protect their profit margins. So the first goal is to make sure that their profit margins
are not gonna collapse, which means that if costs go up, they are gonna increase their prices. Now this is like kind of
the most benign form of coordination, but they can also be bottlenecks that can then coordinate
pricing behavior and that can coordinate this pricing behavior even when the actual bottleneck might already start
to seize because there's still this signal to the whole sector that something different is going on.
And then there is, I guess the component that the excuseflation label is getting at where from
the perspective of the consumers, it's also more legitimate to see prices going up
when there are clear reasons why they're going up. If you imagine you go to your favorite coffee shop
every day and then from one day to the next, the coffee costs twice as much,
then you would probably say like, oh, somehow the guy who's running the coffee shop went nuts, right? If this guy has been telling you over and over again
that they are expecting a rent increase and then you come back and the price of coffee goes up, you'll probably go like,
oh yeah, of course makes sense, right? And something like this, but on a sectoral global level I think
has been going on for example, in the food sector where no one can judge, I mean you had this amazing episode on grain prices
and prices of food items that use grain, right? And I mean as a consumer, I don't know how much is the cost component
of grain in my pasta, right? Or in my bread, but if I hear on the news in the radio on TV
that grain prices are exploding and I see pasta price going up, it kind of makes sense. So there is in other words also
a component of legitimacy in pricing behavior, right? It's something that in economic theory
we have a very hard time capturing. It's not like people walk around with a budget constraint
and a given set of preferences on their mind and like robots, they react to the price that they see, but they look at the context, right?
So if in normal times are basically two things that would constrain firms in their pricing behavior,
on the one hand competition that is fear of losing market shares to their competitors, right? Which would happen if they start hiking prices
and kind of a unilateral action, then that fear is kind of gone once these price hikes start to be more or less coordinated
due to these emergency situations. And the second constraint would be fearing
that customers are just not willing to pay these prices, right? Like whether they are they actually can pay these prices or not,
they might just be deterred if prices suddenly go up for no obvious reason. Now if they are obvious reasons,
they seem to be more willing to accept these price increases. So therefore both of these constraints
are quite dramatically softened in this emergency situation
that we have been living through. So some economists might listen to the story and nod their head and say, yeah, this makes sense,
but for whatever reason prices are going up and workers are gonna demand higher wages to compensate for the higher prices
and you get this self-sustaining, you know, increased more demand and they're like, okay, I can fit this
into the typical inflation expectation story and therefore the Fed should be hiking rates regardless.
Like why couldn't, like could this fit into a typical inflation expectation story?
This is how it becomes entrenched. Yeah, maybe it's like a different thing than like 1970s inflation, but it's still the thing and ultimately
the Fed has to respond the same way. Yeah, I mean first on the wage part of that story,
what we are seeing is basically eventually labor is trying to fight back against collapsing real wages
as workers are basically losing purchasing power, right? But this is a very different story. If you have an initial cost shock that comes
from the energy market, that comes from commodity markets, comes from shipping and so on, basically comes from upstream stuff
and then you have a propagation amplification of that shock as firms react by pricing over volume type of behavior, right?
And then eventually labor goes like, wait a minute, like my purchasing power has collapsed and I'm trying to fight back
to regain some of this lost territory, then this is a reaction to inflation
rather than the origin of inflation. I think this really matters for how we think about what to do against inflation.
But secondly also, I mean when we talk about expectations and expectation anchoring and so on, we somehow think that firms look at the Fed
and they kind of like greet these signals from the Fed to anchor or de-anchor the inflation expectations.
I'm not saying none of this is going on, but when I am reading the earnings calls, I don't see them talk about the Fed a lot.
I see them talk about what their competitors are doing, I see them talk about rational pricing environments.
I see them say things like, with this new force major like the winter storm Elliot,
this has made our pricing environment even more conducive. So they are looking at their immediate environment,
they're looking at are customers accepting of these price increases?
Which is a completely different set of expectations than what we think of when we talk about expectations in this
kind of central bank centered type of fashion. So throughout economic history,
I mean the classic worry about inflation has always been this wage price spiral
that you kind of just outlined. But if that's not what's happening here or if it's not the actual cause of higher prices,
if instead we have like I guess a profit price spiral of some sort, what should we do?
Like what actually arrests this behavior? Because again, if you listen to the company earnings calls,
you can see the executives talking about how surprised they've been about how strong customer demand has been,
how far they've been able to push up prices, and also you see the share price reactions
they're getting rewarded for raising prices. So it seems like there's very little incentive
or a catalyst for this to actually stop. Absolutely. And I would actually say that the investors expectations
is another set of expectations as probably more immediate from the perspective of people taking pricing decisions, right?
Were when representatives of let's say Morgan Stanley, just to pick a random example here
are asking questions on earnings calls about pricing. They are also asking on behalf of a player that is actually
gonna invest quite substantial amounts of money, right? So there's that layer to the expectation story to,
but to actually go to your question, I think first of all we need to stop these impulses, right?
I mean these like gigantic cost shocks that then coordinate these kind of price hikes.
If they can be arrested kind of in the onset, that I think would've made a huge difference.
I think something like the strategic petroleum reserve, which of course eventually was mobilized in 2022,
if that had been mobilized sooner because there was a mindset on the part of policymakers to say oil prices going
up as they started going up in 2021 is a real problem and has the potential to undermine price stability
and economic stability, then they might have acted sooner and they might have acted more decisively.
Now it's of course not only about oil, it's also about gas, other sources of energy, it's about other forms of raw materials
and importantly also about grain. I think for grain actually we ideally would need
some sort of a coordinated international buffer stock, which is an idea that Keynes had
for the institutions, something that he wanted to see as one of the institutions.
But that did not materialize. And there have been proposals like this in the seventies when, I mean obviously there were also
very major commodity price cycles going on at the time. So I think these type of ideas are pretty important.
And they're important not only like looking back and saying, oh yeah, the last three years somehow weren't great,
but now we are back to normal life. So this is a nice historical anecdote or something like this. But they're important because we are living in an age of overlapping emergency.
And as far as I understand, people in the grain market are saying things
like we are basically one major weather event away from another price hike in grain, right?
And if there are bad harvests that are related to climate change happening much faster than many of us might have
thought tipping points being reached much, much sooner than climate scientists still projected not that long ago, right?
Then I think this is something that is quite likely to happen. So what I'm thinking about here is really
a form of economic disaster preparedness so that we have shock absorbers
where shocks to these systemically important things like grain, like energy can be absorbed locally
so that we don't even get this gigantic impulse in the first place. Now for this like propagation and amplification
that comes as firms react to these shocks, I think what we basically need is some sort of
a windfall profits tax that vote kick in whenever there is a major emergency.
Because we have now learned that in these emergencies, these pre-taxes that happen can present situations
where prices can go up very quickly. And I think that if corporate leaders had to learn this this time,
then next time around they have a playbook in hand, right? They know how price over volume works,
they know what to look for, they know what they did last time. And if this is a coordination issue in the sense
that it depends on what your competitors are doing and last time it worked out really well because everybody kind of implicitly
agreed to be doing exactly that, then next time around they just have to look back at what they did last time.
So I think that if there are more shocks, it's likely that we would see what we have seen now in possibly and even more fast.
Windfall profits tax. How does that fight inflation?
Because some people would hear that it's like, oh, you're gonna like add taxes, you're gonna add costs. Maybe there's some like redistribution element
or punishing the rich or punishing the successful. What does that actually, what is the mechanism via which this
is a inflation fighting tool? Well, it's a mechanism that basically takes
away the incentive to do a price over volume strategy, right? Because price over volume makes sense.
If you can't increase prices so much that even when you're selling less, you still end up making more money
because you have hike prices so much. Now of course there can be situations where price
over volume happens to just protect profit margins. So win for profit tax would not happen that,
but we have seen situations where firms actually have managed to quite dramatically increase
their margins with this kind of pricing behavior. So it would kind of cut off the edge of that process, right?
Would cut off what we are calling in our paper amplification. So you have this initial shock and the then this shock
is actually not just propagated through your system, but it's amplified as it as it coordinates
these additional profit increasing price hikes.
So what do traditional ways of fighting inflation, how do they actually play out in a seller's inflation world?
So for instance, the fed hikes interest rates in theory that's supposed to curb demand and therefore prices start going down.
But what's your instinct on how that actually plays out in a world where companies are the driving force behind prices?
Yeah, I mean at best in a very roundabout way, I mean in any case this is always
a very roundabout instrument, right? We have to keep in mind that this is a very, very indirect tool
of fighting inflation. Which by the way, if we are in a situation where we are already at the edge of a recession
where we are already at the edge of a banking crisis where we have had a pandemic and we have a war, and now let's say we have
another major climate shock, right? And let's say we have already hiked interest rates to a point where even hawkish people feel
like okay really shouldn't go higher. I mean what are you gonna do? If you have another shock
that unleashes this kind of process. So first of all, I would say it's too blunt of a tool to deal with frequent,
extremely sectoral shocks as I think they have become more likely. Of course no one hopes that they will happen.
I don't hope they're happening, but I think they have become more likely. So I don't think we are prepared to actually achieve
priceability with the tools that we have in terms of just relying on the central bank.
I also think that if it is the case that there is such a big energy shock, which then central banks would say,
oh we are actually looking through this, right? Then your mindset is like, oh yeah, this is something that is not part of the core inflation.
I'm just looking through this, like la, la, la, that's not happening, right? I think this is not the right mindset that we need
because this is like a very, very dangerous impact. So in that sense it's kind
of leading us in the wrong direction. But also at the end of the day what happens with interest rate hikes is that it's designed
to cool down the labor market right? Now if it is a case that inflation erases purchasing power
and rate increases were not the origin of this inflation. This means that the majority of wage dependent people
are actually being hurt by inflation and then they're kind of punished a second time by cooling down the labor market, right?
So I think even from a kind of justice perspective that is hugely problematic, but it's also not very effective
because it's kind of getting at the wrong thing. So I take your point about things like the strategic
petroleum reserve and how the logic of these sort of buffer stocks, particularly of commodities could be used
in like future shocks as buffers in both directions. But how do you think about this idea
with respect to services? Because it's hard to believe, okay, maybe we keep a lot of oil that we don't use in tankers.
It's hard to believe we would say like, you know, we're not gonna under book, you know, have all flights be 80% booked
or all hotels be 80% booked or all veterinarians like carve 20% of their time,
and services in terms of right now even like, you know, in spring 2023 like services inflation
is particularly what the Fed is like focused on. So how do you like think about some of these things outside
of the sort of pure goods commodity realm, like applying some of the same insight and logic? Yeah, so I think if we look at services,
shipping has probably been the most important service that had a very large price explosion
that I would see as part of the impact stage. And I think what we saw there is that basically you had,
I mean a literal bottleneck, right? Like if you think back to how the Port of LA looked,
I mean this is the image of a bottleneck, right? And shipping companies could increase
their freight rates several times over. So prices went up and they had actually the largest profits in years and years, right?
So they were in a situation where as I mean if I was a leader of one of these large shipping companies,
I was in no rush to get out of this bottleneck, right? Because it's the best of times for me, right?
Sure. So for example, for shipping, I think A ,we need protocols like, I mean how do you unblock a port,
and B, some sort of a price gouging legislation of the type that the New York State Attorney General
is currently introducing also for essential stuff that is further up the value chain
rather than just the essential consumer facing stuff I think could be really helpful because this is not to say that prices cannot
go up at all if this kind of emergency happens and shipping companies have higher costs because things get complicated.
But it's to say that they don't get these perverted incentives of having freight rates
that increased multiple times over, which I think would actually also give them more incentive
to get out of the blockage as as opposed to basically profit from the situation.
Wait, so just on this point, can you talk to us a little bit about investment? Because the classic argument against some sort
of windfall tax or price control would be, well you don't wanna artificially bring down the prices,
you want people to make a ton of money and that way they'll invest more in their business and build out capacity and eventually
the additional production is gonna be the thing that maybe starts to resolve the bottleneck and bring down prices.
How does that work and is that a viable critique of some of the measures that you're talking about?
Well, I mean first of all I would say that hiking interest rates is a recipe designed to bring down investment, right?
So if we are talking about different ways of fighting inflation, then I am more worried about the interest rate hiking policy
than I am about an emergency price gouging law or an a national emergency win
for-profit tax or something like that. But also we have to see that if we are talking about price over volume,
then we are in a situation where with lower volumes firms can make more money, right? Which means that they
are basically contracting their capacity. And I think that if we look at the oil sector,
which on my mind has been a very important element in this inflation story,
that it's quite clear that they are saying very explicitly on the earnings calls that they are taking a disciplined
approach to investment because they are reaping record profits, as they have reduced capacity.
Everyone remembers 2013 and the big expansion and they don't wanna repeat that. Exactly, exactly.
So it's not necessarily the case that if you can, I mean if you have learned that you can actually reap record profits
when your supply is constrained, that this then encourages you to have a lot of redundant extra capacity
or to hugely expand your capacity and therefore go for big investments. Where there are areas where we are particularly worried
about curtailing investments with these kind of policy measures. I think you could have a policy
that basically stipulates that if you are investing in like let's say green technologies,
like let's say you you you are using the crisis a moment to upgrade your technology
to become a low carbon manufacturer or something this, that you could have a tax write off
for these kind of investments that we really want, that we want for a green transition that would not count towards the ways
in which your windfall profits tax is calculated. So that in this kind of situation these firms
might still have an incentive to do price over volume, but at least they would use the money that they get to invest in the stuff that we really need
to make our economy more resilient rather than to buy back shares or do these kind of things.
You know, it's interesting going back to this point that part of the impulse or part of the expectation comes from investors
themselves and these sort of expectations. You're gonna push price too. You're gonna push price too.
Do you think there's any element here where corporations themselves would like to get outta this game,
that a sort of like third party administrator of supply of price of investment comes in and actually like solves a problem for corporations
so that they get off this treadmill? Because one thing that I think about sometimes is any individual company may benefit
from higher prices and higher margins, but on the whole a series of like Fed rate hikes
to hike inflation is not great for stocks, which is how most of these executives get paid.
Yeah, absolutely. I think there is like on the one hand a lot of coordination, right? With these price hikes. On the other hand there's
a lot of coordination failure if you want. So because there are outcomes of this process that in some sense not sustainable, right?
And actually if we look at what happened after World War I, when you had like kind of price hikes
coming out of a bottleneck kind of transition from war to post-war economy,
you had a very short lived boom that was very inflationary and then at a sharp turn into a deflationary recession.
I don't think that such a sharp turn is in the cards because now we have these very concentrated sectors
for most of the economy, which means that in these sectors firms are price makers
and they tend to not lower prices in these kind of sudden ways in which we would see it in commodity markets
or price taking markets. So I'm not so worried about this sudden turn as I would've been in a different setup, but nevertheless,
yes it does trigger, it does trigger rate hikes, it does create a situation where I think a lot of corporate
leaders are also nervous, like how far can we take this? It's like it's a bit like you're in this gambling game
where you keep winning but you kind of don't trust. And everyone seems surprised that it's actually paid off this much for so long, right?
Yeah, everybody seems to be really surprised that, I mean that, yeah, so the degree of coordination on that front
has been totally surprising. But then you can also not chicken out, right? I mean we saw when Walmart for very short blips of time
was making announce that they are discounted and that they are not going to play this price hiking game
and then they had this share selloff, right? So I mean there's also like kind of a discipline from financial markets to keep doing this,
but at the same time it's kind of clear that maybe it cannot keep going. But also we have to see that if we look
at the data of changes in profit margins, it's very roughly speaking about two thirds of sectors
that benefited and one one third or so that did not benefit. I don't have a very clear picture yet
like how this distribution works. But in any case, we know that there are also sectors
and that there are firms that are suffering pretty badly from this, right? And if we think of a capitalist economy
as being coordinated by the profitability of different things, right?
As the most important signal for capital allocation and this profitability gets kind of random
because in some sectors firms can play this prize of a volume game and then some other sectors it
might be more difficult to pour this off. And this doesn't have reasons that are necessarily tied
into the entrepreneurial genius of one firm versus the other or the necessity
for society for production of one thing over the other. But it just has to do with whatever specific consolation enabled these kind of price hikes.
And I think we also really have a problem, right? If profitability becomes random. Right?
So maybe like the egg companies do really well for some reason 'cause everyone's heard about bird flu for instance.
We did a whole episode on it. And so all the egg companies raise their prices at the same time and make a lot of money.
But meanwhile there's some, I don't know, software startup doing something really cool but they can't push through
the same kind of price increases. Absolutely. And even like between product lines in individual firms,
like if you look at what happened in the car sector, right? Where suddenly because I mean there you actually
had a real physical bottleneck and car companies decided to only, I mean not only but predominantly produce higher end models
that then resulted in a situation where all these cars that normal people are driving became
basically not available on the market, right? Which is an outcome that is in many ways undesirable
because then maybe people can't make it to work because they can't afford a car, which then like kind of makes the labor market less fluid in a situation
where we already have labor shortage in certain areas. So, but yeah. So since we're on the topic of capital allocation
and capitalist economies and how it's supposed to work, can we maybe talk about a slightly less capitalist country,
the first time we ever had you on the show it was to talk about China and I'm wondering if you contrast and compare inflation in the West,
and Europe and the US, with what's going on in China, it does seem like although there are some pockets of high prices in the East,
it does feel like on the whole it's less of an inflation story.
So what are you thinking about in terms of that comparison? Yeah, I think it's really an important thing to look at.
I think we haven't discussed this like generally enough that there has been really this pretty dramatic divergence
between Europe and the US with this high inflation in China with almost a deflation kind of problem in some stretches.
I think of course it has to do with the different timeline of COVID. I mean no question about that, right?
I mean they have had shutdowns when we were not in shutdown and they were open when we were
in shutdown and so on, right? So clearly macro economically speaking, they are at a different point. They also did not have the kind of stimulus packages
that they had in the global financial crisis and so on. So certainly the macro environment is different,
but I think there's still the question of how did the global food
and energy price shock arrive in China, right? And why did this shock not unleash similar
kind of dynamics there. Right, it didn't seem to get propagated as much as it did elsewhere. Yeah.
So I think there like different layers. So first of all, I mean for grain, which I think is an important one for food,
they have of course a gigantic national reserve system, right? And they basically have to a certain degree buffer
their domestic prices against international prices. So Chinese prices used to be,
for important grains like rice, wheat, used to tend to be higher than the international prices, but stable.
And when the international prices exploded, they kind of stayed broadly speaking where they were.
And the way that they have managed that is that first of all they have
a very high self-sufficiency rate, but I don't think this is enough because I mean the US has a very high self-sufficiency rate, right?
It's even like a major exporter. Germany for example, also has a very high self-sufficiency rate. It's also an exporter,
but still these international price movements have arrived right in China. They have not because the import quota
is very strictly managed and it's basically a situation where most of the imports are managed
by a very large state owned company, COFCO. And then domestically.
So in that sense the international domestic prices are not really as interlinked as they would be in other situations and domestically
they still have a minimum purchase price. So that they basically ensure that wherever it's reasonable to cultivate
with this minimum purchase price grain is being cultivated. And then they have these grain auctions
where they would be adding supply to the grain market if there is a shortage from basically a state-owned reserve system.
So in some sense they have for grain, what the US has with the strategic petroleum reserve
just on a probably even much more gigantic scale.
And I'm saying probably here because we don't really know the size of of the reserve. It's a state secret.
Yeah, I think there's a strategic pork reserve as well, right? There is. That's my favorite one,
whenever they replenish the pigs. The other SPR. Yeah, there's actually also a live pig reserve.
In other words they're like state owned pork farms, pig, sorry, you can't have a pork farm.
You only can have a pig farm, sorry, the state owned pick farms, they're frozen pig reserves
and they are also like kind of attempts of the state. But again these auctions and I mean purchases
and auctions to basically send signals into the market. So it's not really just about the physical supply,
but it's also about like let's say there's a price hike for pork and then there's an announcement
that the state is now doing a major auction of frozen pork and this is send sending a signal to all market players
that this price hike might not continue, which then should encourage people to get rid
of the inventories and thereby also add supply. So it sounds like, I mean we have our SPR and it was
never really used as a price stabilizer. So in addition to all these vehicles like the strategic pork supply and the other grain,
it seems like they also have practice in this that actually like unlike RSPR, which was sort of pivoted or like,
oh we don't have to use it just for strategic purposes, that this is like part of like a more ingrained macro management there.
Absolutely. And I mean the pork example is actually one where it doesn't work that great because hawk cycles are a thing, right?
And they are a thing in China too, and you have like millions of small holders farming pigs.
So you have very intense hawk cycles. So you can smoothen the cycle but you never get rid of it.
But it's technically not at all simple, right? I mean you need to have basically a system
that can store that stuff in a way that the pork that they sell is the pork that you want to buy and eat, right?
You need to have agents that are able to purchase this on a relatively large scale.
You then have to have these auctions that have to be professionally organized and you also have to understand the market really well.
I mean, remember when there was an announcement earlier this year that the US was gonna buy back oil to replenish
its strategic petroleum reserve and then oil prices started spiking, right? So you have to have a very good handle
on how to communicate with the market, like when to say something about what you're doing and when not to say something about what you're doing.
So it's quite demanding and a lot of things can go wrong. Yeah.
And even in China where they do have practice doing this, I mean I remember with pork specifically after the African swine fever outbreak,
they actually made the cycle even worse 'cause they told everyone ramp up production and then it was too much
and then prices collapsed and everyone got out. And so it's just been going like seesawing ever since then.
Absolutely. And it's actually been for the first time a situation where European pork importers have
had difficulty selling in China because suddenly the prices collapsed in China and in Europe they were going up
with the very high grain prices. The funny thing is, while I was in China, I was doing many interviews with people on inflation,
including folks from the Word Bank, from the IMF, from major banks and so on.
And eventually every single economist that I talked to started to talk about pork. Oh really? And they even have all these like jokes on pork.
So they say like the CPI in China actually stands for the China Pork .
That's great, I love that all the economists are viewing inflation through the lens of pork. Like we do with the oil here in this country.
Yes, it's true. But can I ask a personal question, which is, you know, you mentioned,
well we started off this conversation talking about how this idea of sellers inflation has really gathered steam in recent weeks.
And you mentioned the "Guardian" article where you talked about price controls and I remember when that came out,
you got a ton of criticism online, lots of Twitter people calling you various names,
Paul Kirkman said some not very nice things. But since then we've seen price controls
in Europe, we've seen on the subject of sellers inflation and maybe windfall taxes.
We've seen the UK for instance, talking about capping grocery items and things like that.
How do you feel about how this is sort of seeping into the the mainstream?
Yeah, I mean maybe to add to your list, we have also of course seen the European gas price cap,
which is an international, I mean transnationally coordinated kind of price cap and the oil price cap against Russian oil,
which I mean in principle could be for all oil, right? I mean just in terms of the technicality of the price control mechanism.
So yes, absolutely. It's been totally astonishing to me.
The reason why I wrote this article at the time was because A,
I felt that the debate amongst economists was polarized between those who were saying like,
oh, we don't have to worry about inflation too much, it's just transitory. And those who were saying, oh, inflation's really a problem,
therefore we have to hike interest rates yesterday. And I felt like there was a position missing there,
which is like, yeah, we have very large price spikes and they're a problem.
40:50
But if you have a fire in the kitchen,
you don't set your whole house under water, but you try to put out the fire in the kitchen, right?
So not as an apologies of price controls, but to say, hey, there is something sectorial
that we can do and direct means of price stabilization can be an emergency measure to buy time
when you are faced with these kind of crazy price spikes.
Now the key word here I think is emergency measure.
And my sense is that the more urgent the emergency became,
the more acceptable these kind of measures ended up being.
And I think that in Europe you can see this very clearly in terms of the reactions to the war,
but then also like basically as it became colder, right? And the fear of winter just became very real.
The perceived emergency became more intense and the willingness to take this
kind of measures became greater.
The sellers inflation story, I feel like it's related but also kind of
slightly separate in the sense that the price control debate is really about emergency measures that you take, right?
And the sellers inflation paper is really about how do we understand this kind of inflation.
But I think the shift that we are seeing now that of course is not complete and so on,
but that at least it's becoming more acceptable to think about other ways of understanding how inflation came about is kind of the first step that we need to take
to move towards a different kind of economic stabilization paradigm that I personally think we really need
in this age of overlapping emergencies. So it's been quite a wide ride but I guess talking today
and it has been very wide so god knows what's gonna happen next. It looks like there has been some movement
in a good direction in the sense that the discourse is becoming more open. And I think that an open discourse is really what we need
if we are faced with these unprecedented situations because you cannot respond to an unprecedented situation
by saying we have always known how exactly it works. Yeah. Isabella Weber,
thank you so much for coming back on Odd Lots. Really appreciated having you in person as well.
It was really fun. Thank you so much for having me. Thank you so much. So Joe, I always enjoyed talking to Isabella.
It is crazy to see how quickly things seem to be changing in this particular area of discourse.
Totally. And you know, I know we didn't really get into it, but I also just think that like the internet and Twitter
and like it sort of cuts in both directions because you could put out an idea and get tons of abuse and backlash,
but there's also like a really rapid way which ideas proliferate right? In a way I don't think would've happened in like, you know,
a different era where you like wait like five years to get a paper, you know, referee it in a journal or something like that.
But I'm fascinated as I think we both are by like how ideas like can move so fast and like,
especially in the nature of crisis. Absolutely. And the other things that stood out to me are one, you mentioned this treadmill idea Yeah.
Of like, you know, it sounds great companies raising prices in order to pad their profit margins,
but at some point you have to imagine like there are some executives who get nervous about how far they can actually push this.
I liked Isabella's point about like the gamble, right? Because at some point, like you could imagine where you like go
with a pricing strategy and you really mistime it and suddenly you really do like lose share
in like a meaningful way, right? Or you damage your brand, which seems plausible. It's like, oh this company is greedy at a time.
And so it sort of depends on like the sort of coordination. And I do wonder whether like executives
would ever like off the treadmill. In some way, right? They're sort of, they're pulling the lever every quarter
and so far it's paid out each time, but maybe one day it won't. The other thing that really stood out to me was,
I mean what we're talking about is basically the need potentially for a more interventionist government
in the economy in one way or another. Whether it's, you know, trying to smooth out some of those production cycles,
trying to smooth out big price spikes. And I feel like that's always going to be controversial,
particularly- It's always gonna be political. It's always gonna be political, particularly in the US, but it is, you know, that said,
we have seen some inklings of it with, for instance, the strategic petroleum reserve.
And I think this is really the, like to my takeaway from all this is people look at this greenflation story, whatever,
and they're like, yeah, but inflation is still really high. And so the Feds, we gotta do something about it.
And I think to Isabella's point, like,
it's important by looking at different dimensions and not just saying, oh, it's 'cause of wages or not just
'cause of like rates or money supply. It allows us like this sort of like mental space to open up. And some of them, like we may not have the tools,
like we may not have the tools right now to like stabilize, keep grain prices stable. We don't have the sort of equivalent,
but like in thinking about like, is rate hikes really gonna be the best way here? Is the cost in terms of like general welfare
and employment worth it? If this is really not what the story is about. I think it's still like very useful from
that perspective is like, okay, how good are these tools? And if we're gonna use a blunt tool like, right,
how much damage are we gonna do with this like, mediocre tool. Well again, going back to the investment point.
If the issue is a bottleneck in production, then maybe you don't wanna raise
the cost of investment and production. Do you wanna raise the cost of a real estate developer at a time when rent is one of the highest,
yeah things like that, yeah. You know what Joe, I've decided I'm gonna base my entire personality going forward on campaigning
for a strategic pork reserve in the US. But it's hard there too I guess,
even that isn't foolproof. But yeah, I support that. Bringing home the bacon. That's my motto. Stimulizing the bacon.
Shall we leave it there? Let's leave it there. All right, this has been another episode of the Odd Lots Podcast. I'm Tracy Alloway.
You can follow me on Twitter @TracyAlloway. And I'm Joe Weisenthal. You can follow me on Twitter @TheStalwart.
Follow our guest, Isabella Weber on Twitter @IsabellaMWeber. Follow our producers Carmen Rodriguez @CarmenArmen
and Dashiell Bennett @DashBot. And for more Odd Lots content, go to bloomberg.com/oddlots where we have a blog,
we have transcripts, we have a newsletter that comes out Friday. And check out the Discord, discord.gg/oddlots,
hang out 24/7 with other listeners and talk about all these topics. And you should stream Bloomberg Originals on Samsung TV,
Roku, Apple, any other of these streaming platforms. And make sure to tune in on Bloomberg TV at 10:00 p.m.
Thanks for listening and watching.
0:12 Hello and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway. And I'm Joe Weisenthal. 0:17Joe, do you remember the episode we did, I think it was just a couple months ago, 0:22with the Corbu strategist, Samuel Rines, about companies are telling us the real reason they're raising prices. 0:29Yeah, a great episode that sort of helped me like analyze like corporate earnings calls from then on 0:35and really like think about particularly in the consumer space where he had this thesis that companies are like very explicitly willing 0:41to sacrifice volume expansion in favor of higher prices and higher margins. Right. 0:47He called it price over volume. And since that episode, so we actually wrote an article based on that episode and we had a lot of quotes from Sam. 0:55We also cited a research paper from an Odd Lot's favorite, Isabella Weber, 1:01and we talked about this phenomenon, we called it excuseflation, So this idea that companies are using 1:08all these one-off emergencies as an excuse to raise prices. But since then this whole idea has exploded 1:16into the public consciousness in various ways under different umbrella terms. 1:21So Isabella used the term sellers inflation. I've seen like profit led inflation, 1:28greed inflation. Although I think that's a bad term for it personally, but it's everywhere now. Right, and it's funny 'cause it's one 1:35of these things where, you know, economists are sort of like scandalized by sort of alternative ideas 1:42about inflation and it's like they have certain things like some people say money supply, others say like labor costs and wages, 1:47but like it feels like on Wall Street there's kind of less mystery. It's like no, they're like at least you know, 1:53according to the people who read the calls, it's like no, they're telling us they're willing to push price. 1:58And I guess the question is like, you know, well there's lots of follow on questions, but like I think there's some really interesting policy 2:04ramifications from some of this identification. Totally. And it is funny, it's not, Pepsi isn't talking about like, 2:09oh the money supply is increasing, therefore we're raising our prices. They're talking very explicitly about, 2:15well we have these one-off reasons maybe to raise our prices and so we're gonna see how far we can take it to the consumer. 2:22So anyway, everyone is talking about this, whether you call it greedflation, excuseflation, profit-led inflation, sellers inflation. 2:30We need to go back to one of our favorite guests, who's done a lot of academic work on this topic. 2:36We specifically cited her work in the piece that we did. We're gonna be speaking with Isabella Weber. I'm psyched, on set. 2:42All right. Isabella Weber, economics professor at University of Massachusetts Amherst, 2:47thank you so much for coming back on. Thanks so much for having me back and it's a true pleasure to be here in person. 2:52Yeah, this is a treat. I didn't realize up until like five minutes ago that you were gonna be on set. I thought we were gonna look the video 2:58so great to finally meet you. Oh, the first time we're actually meeting in person. Yeah, have you been surprised 3:03at all by how quickly this seems to have become, I hesitate to call it mainstream 'cause people 3:08are still debating it but it's in the "Wall Street Journal", it's in the "New New York Times", certainly in Bloomberg coverage. 3:15Yeah, I think it has been very surprising, especially since some of the key data on the profit margins 3:21actually already came out in the fourth quarter of 2021. So, and you guys have actually been covering 3:26that at the time, you were covering the profit margin explosion that happened at the same time as inflation started to take off. 3:34And in this by now probably infamous "Guardian" piece that I wrote, 3:39I actually started by saying there is a so far pretty much undiscussed phenomenon, 3:45which is an explosion of profit margins that coincides with inflation and we should take a closer look at that. 3:51So I think in many ways when our paper came out at the beginning of this year, 3:56it has kind of been something that had been going on for a long time and companies have been saying this on earnings 4:03calls for a long time. The groundwork folks have been calling this out for a long time, but now it really took off, so. 4:11So I guess one of my questions and have many is, you know, there are different factors that people talk about driving inflation 4:16and obviously the tight labor market, fast wage growth, high levels of consumer demand, 4:23a lot of the supply chain bottlenecks that we've talked about over the years on the show, the supply side factors, why is it important? 4:31Let's start with that to sort of like think about correct identification of different causes. 4:37Yeah, I mean when economists talk about causation, they have very, very high standards, right? 4:43So I'm not yet there to say like what I did, it's like a causal analysis just to put this out there. 4:48It's kind of a disclaimer, but I think this is kind of part of the challenge that we face because we are 4:54in a really unprecedented moment in the world, in the economy, in the global economy, right? And inflation is kind of part 5:00of that whole unprecedented moment. So you are getting these pieces of data that are coming out and you kind of have 5:06to reason on them however incomplete the data might be. And if you just look at it from the perspective 5:13of your standard inflation paradigm, then you basically just look at money supply, aggregate demand, and maybe wages. 5:19And you don't look at all these other stuff that you guys have been reporting about for months and months and months, right? 5:25But if you sit in a corporate boardroom, then you are actually looking at all this other stuff. So then from your perspective, 5:31prices present themselves as something very different. So what we are doing with this research I think is 5:37to kind of say let's take the information that we have, however incomplete it still may be, 5:43and try to make sense why we are seeing what we are seeing. What we are seeing is that on earnings calls time and again 5:51corporate leaders are saying that they can take pricing and that they can increase prices in ways 5:56that they might not even have expected and that they can increase prices even when volumes are going down, 6:02which is just against the logic of basic supply demand, right? Where we would expect with demand going up, 6:09prices going up and not the other way around. Now you might say, well it's about the bottleneck and then demand 6:15is strong so therefore it's still a demand kind of story. But then I would say, well if I look at the earnings 6:20calls in the latest quarter, right? Where clearly the bottlenecks for the most part have ceased 6:26and they're still taking price when volumes are going down, then clearly this is also not 6:32a pure kind of bottleneck type of story. Well maybe just to step back for a second, 6:37talk to us about what seller's inflation, this is the term that you use actually is 6:42and how maybe it differs to traditional conceptions of greedflation, 6:49because this is one reason I remember when we were writing that piece, Joe, this is one reason why I wanted to call it something other than greedflation 6:55because it's not like everyone woke up in March, 2020 and suddenly decided to become more greedy. 7:01Which is a common critique of like that. Yeah, and quite frankly, I think that everybody agrees on that. 7:06Like no one is saying that there has been this sudden greedy impulse, firm leaders just became more greedy 7:13than they used to be, right? That is just not a good theory. So the question is how can it be that in incredibly 7:20concentrated industries we had decades of surprising price stability, right? 7:26Even like deflation in some periods. 7:31And now in this same highly concentrated kind of setup, we suddenly get this price 7:36over volume type of pricing behavior, right? And what we are arguing in our paper 7:42is that there's basically different components that coordinate price hikes in ways in which 7:48they could not be coordinated without these emergencies happening, right? 7:53So one prominent thing is a cost shock. I mean we have had gigantic cost shocks 7:58coming out of energy, right? That kind of send a signal to firms, okay, now is the time to increase prices, 8:05which means that they can be fairly sure that their competitors are also increasing prices because the way that they're pricing 8:11is to protect their profit margins. So the first goal is to make sure that their profit margins 8:16are not gonna collapse, which means that if costs go up, they are gonna increase their prices. Now this is like kind of 8:22the most benign form of coordination, but they can also be bottlenecks that can then coordinate 8:28pricing behavior and that can coordinate this pricing behavior even when the actual bottleneck might already start 8:33to seize because there's still this signal to the whole sector that something different is going on. 8:40And then there is, I guess the component that the excuseflation label is getting at where from 8:47the perspective of the consumers, it's also more legitimate to see prices going up 8:52when there are clear reasons why they're going up. If you imagine you go to your favorite coffee shop 8:58every day and then from one day to the next, the coffee costs twice as much, 9:03then you would probably say like, oh, somehow the guy who's running the coffee shop went nuts, right? If this guy has been telling you over and over again 9:11that they are expecting a rent increase and then you come back and the price of coffee goes up, you'll probably go like, 9:16oh yeah, of course makes sense, right? And something like this, but on a sectoral global level I think 9:22has been going on for example, in the food sector where no one can judge, I mean you had this amazing episode on grain prices 9:30and prices of food items that use grain, right? And I mean as a consumer, I don't know how much is the cost component 9:38of grain in my pasta, right? Or in my bread, but if I hear on the news in the radio on TV 9:44that grain prices are exploding and I see pasta price going up, it kind of makes sense. So there is in other words also 9:51a component of legitimacy in pricing behavior, right? It's something that in economic theory 9:56we have a very hard time capturing. It's not like people walk around with a budget constraint 10:02and a given set of preferences on their mind and like robots, they react to the price that they see, but they look at the context, right? 10:08So if in normal times are basically two things that would constrain firms in their pricing behavior, 10:15on the one hand competition that is fear of losing market shares to their competitors, right? Which would happen if they start hiking prices 10:22and kind of a unilateral action, then that fear is kind of gone once these price hikes start to be more or less coordinated 10:30due to these emergency situations. And the second constraint would be fearing 10:35that customers are just not willing to pay these prices, right? Like whether they are they actually can pay these prices or not, 10:40they might just be deterred if prices suddenly go up for no obvious reason. Now if they are obvious reasons, 10:46they seem to be more willing to accept these price increases. So therefore both of these constraints 10:52are quite dramatically softened in this emergency situation 10:57that we have been living through. So some economists might listen to the story and nod their head and say, yeah, this makes sense, 11:06but for whatever reason prices are going up and workers are gonna demand higher wages to compensate for the higher prices 11:12and you get this self-sustaining, you know, increased more demand and they're like, okay, I can fit this 11:18into the typical inflation expectation story and therefore the Fed should be hiking rates regardless. 11:24Like why couldn't, like could this fit into a typical inflation expectation story? 11:30This is how it becomes entrenched. Yeah, maybe it's like a different thing than like 1970s inflation, but it's still the thing and ultimately 11:36the Fed has to respond the same way. Yeah, I mean first on the wage part of that story, 11:42what we are seeing is basically eventually labor is trying to fight back against collapsing real wages 11:49as workers are basically losing purchasing power, right? But this is a very different story. If you have an initial cost shock that comes 11:57from the energy market, that comes from commodity markets, comes from shipping and so on, basically comes from upstream stuff 12:03and then you have a propagation amplification of that shock as firms react by pricing over volume type of behavior, right? 12:10And then eventually labor goes like, wait a minute, like my purchasing power has collapsed and I'm trying to fight back 12:17to regain some of this lost territory, then this is a reaction to inflation 12:22rather than the origin of inflation. I think this really matters for how we think about what to do against inflation. 12:30But secondly also, I mean when we talk about expectations and expectation anchoring and so on, we somehow think that firms look at the Fed 12:37and they kind of like greet these signals from the Fed to anchor or de-anchor the inflation expectations. 12:43I'm not saying none of this is going on, but when I am reading the earnings calls, I don't see them talk about the Fed a lot. 12:49I see them talk about what their competitors are doing, I see them talk about rational pricing environments. 12:55I see them say things like, with this new force major like the winter storm Elliot, 13:00this has made our pricing environment even more conducive. So they are looking at their immediate environment, 13:07they're looking at are customers accepting of these price increases? 13:12Which is a completely different set of expectations than what we think of when we talk about expectations in this 13:18kind of central bank centered type of fashion. So throughout economic history, 13:24I mean the classic worry about inflation has always been this wage price spiral 13:30that you kind of just outlined. But if that's not what's happening here or if it's not the actual cause of higher prices, 13:36if instead we have like I guess a profit price spiral of some sort, what should we do? 13:43Like what actually arrests this behavior? Because again, if you listen to the company earnings calls, 13:49you can see the executives talking about how surprised they've been about how strong customer demand has been, 13:55how far they've been able to push up prices, and also you see the share price reactions 14:01they're getting rewarded for raising prices. So it seems like there's very little incentive 14:06or a catalyst for this to actually stop. Absolutely. And I would actually say that the investors expectations 14:13is another set of expectations as probably more immediate from the perspective of people taking pricing decisions, right? 14:20Were when representatives of let's say Morgan Stanley, just to pick a random example here 14:25are asking questions on earnings calls about pricing. They are also asking on behalf of a player that is actually 14:33gonna invest quite substantial amounts of money, right? So there's that layer to the expectation story to, 14:39but to actually go to your question, I think first of all we need to stop these impulses, right? 14:47I mean these like gigantic cost shocks that then coordinate these kind of price hikes. 14:52If they can be arrested kind of in the onset, that I think would've made a huge difference. 15:00I think something like the strategic petroleum reserve, which of course eventually was mobilized in 2022, 15:06if that had been mobilized sooner because there was a mindset on the part of policymakers to say oil prices going 15:14up as they started going up in 2021 is a real problem and has the potential to undermine price stability 15:21and economic stability, then they might have acted sooner and they might have acted more decisively. 15:27Now it's of course not only about oil, it's also about gas, other sources of energy, it's about other forms of raw materials 15:34and importantly also about grain. I think for grain actually we ideally would need 15:40some sort of a coordinated international buffer stock, which is an idea that Keynes had 15:46for the institutions, something that he wanted to see as one of the institutions. 15:51But that did not materialize. And there have been proposals like this in the seventies when, I mean obviously there were also 15:57very major commodity price cycles going on at the time. So I think these type of ideas are pretty important. 16:06And they're important not only like looking back and saying, oh yeah, the last three years somehow weren't great, 16:11but now we are back to normal life. So this is a nice historical anecdote or something like this. But they're important because we are living in an age of overlapping emergency. 16:19And as far as I understand, people in the grain market are saying things 16:24like we are basically one major weather event away from another price hike in grain, right? 16:30And if there are bad harvests that are related to climate change happening much faster than many of us might have 16:37thought tipping points being reached much, much sooner than climate scientists still projected not that long ago, right? 16:45Then I think this is something that is quite likely to happen. So what I'm thinking about here is really 16:50a form of economic disaster preparedness so that we have shock absorbers 16:55where shocks to these systemically important things like grain, like energy can be absorbed locally 17:02so that we don't even get this gigantic impulse in the first place. Now for this like propagation and amplification 17:08that comes as firms react to these shocks, I think what we basically need is some sort of 17:16a windfall profits tax that vote kick in whenever there is a major emergency. 17:22Because we have now learned that in these emergencies, these pre-taxes that happen can present situations 17:28where prices can go up very quickly. And I think that if corporate leaders had to learn this this time, 17:34then next time around they have a playbook in hand, right? They know how price over volume works, 17:41they know what to look for, they know what they did last time. And if this is a coordination issue in the sense 17:47that it depends on what your competitors are doing and last time it worked out really well because everybody kind of implicitly 17:53agreed to be doing exactly that, then next time around they just have to look back at what they did last time. 17:59So I think that if there are more shocks, it's likely that we would see what we have seen now in possibly and even more fast. 18:08Windfall profits tax. How does that fight inflation? 18:13Because some people would hear that it's like, oh, you're gonna like add taxes, you're gonna add costs. Maybe there's some like redistribution element 18:19or punishing the rich or punishing the successful. What does that actually, what is the mechanism via which this 18:25is a inflation fighting tool? Well, it's a mechanism that basically takes 18:31away the incentive to do a price over volume strategy, right? Because price over volume makes sense. 18:38If you can't increase prices so much that even when you're selling less, you still end up making more money 18:44because you have hike prices so much. Now of course there can be situations where price 18:49over volume happens to just protect profit margins. So win for profit tax would not happen that, 18:55but we have seen situations where firms actually have managed to quite dramatically increase 19:01their margins with this kind of pricing behavior. So it would kind of cut off the edge of that process, right? 19:09Would cut off what we are calling in our paper amplification. So you have this initial shock and the then this shock 19:15is actually not just propagated through your system, but it's amplified as it as it coordinates 19:21these additional profit increasing price hikes. 19:26So what do traditional ways of fighting inflation, how do they actually play out in a seller's inflation world? 19:33So for instance, the fed hikes interest rates in theory that's supposed to curb demand and therefore prices start going down. 19:41But what's your instinct on how that actually plays out in a world where companies are the driving force behind prices? 19:49Yeah, I mean at best in a very roundabout way, I mean in any case this is always 19:54a very roundabout instrument, right? We have to keep in mind that this is a very, very indirect tool 20:00of fighting inflation. Which by the way, if we are in a situation where we are already at the edge of a recession 20:06where we are already at the edge of a banking crisis where we have had a pandemic and we have a war, and now let's say we have 20:11another major climate shock, right? And let's say we have already hiked interest rates to a point where even hawkish people feel 20:18like okay really shouldn't go higher. I mean what are you gonna do? If you have another shock 20:23that unleashes this kind of process. So first of all, I would say it's too blunt of a tool to deal with frequent, 20:32extremely sectoral shocks as I think they have become more likely. Of course no one hopes that they will happen. 20:39I don't hope they're happening, but I think they have become more likely. So I don't think we are prepared to actually achieve 20:46priceability with the tools that we have in terms of just relying on the central bank. 20:52I also think that if it is the case that there is such a big energy shock, which then central banks would say, 20:58oh we are actually looking through this, right? Then your mindset is like, oh yeah, this is something that is not part of the core inflation. 21:04I'm just looking through this, like la, la, la, that's not happening, right? I think this is not the right mindset that we need 21:09because this is like a very, very dangerous impact. So in that sense it's kind 21:15of leading us in the wrong direction. But also at the end of the day what happens with interest rate hikes is that it's designed 21:22to cool down the labor market right? Now if it is a case that inflation erases purchasing power 21:27and rate increases were not the origin of this inflation. This means that the majority of wage dependent people 21:34are actually being hurt by inflation and then they're kind of punished a second time by cooling down the labor market, right? 21:40So I think even from a kind of justice perspective that is hugely problematic, but it's also not very effective 21:46because it's kind of getting at the wrong thing. So I take your point about things like the strategic 21:52petroleum reserve and how the logic of these sort of buffer stocks, particularly of commodities could be used 21:59in like future shocks as buffers in both directions. But how do you think about this idea 22:06with respect to services? Because it's hard to believe, okay, maybe we keep a lot of oil that we don't use in tankers. 22:11It's hard to believe we would say like, you know, we're not gonna under book, you know, have all flights be 80% booked 22:17or all hotels be 80% booked or all veterinarians like carve 20% of their time, 22:22and services in terms of right now even like, you know, in spring 2023 like services inflation 22:29is particularly what the Fed is like focused on. So how do you like think about some of these things outside 22:35of the sort of pure goods commodity realm, like applying some of the same insight and logic? Yeah, so I think if we look at services, 22:42shipping has probably been the most important service that had a very large price explosion 22:47that I would see as part of the impact stage. And I think what we saw there is that basically you had, 22:53I mean a literal bottleneck, right? Like if you think back to how the Port of LA looked, 22:59I mean this is the image of a bottleneck, right? And shipping companies could increase 23:07their freight rates several times over. So prices went up and they had actually the largest profits in years and years, right? 23:14So they were in a situation where as I mean if I was a leader of one of these large shipping companies, 23:20I was in no rush to get out of this bottleneck, right? Because it's the best of times for me, right? 23:25Sure. So for example, for shipping, I think A ,we need protocols like, I mean how do you unblock a port, 23:33and B, some sort of a price gouging legislation of the type that the New York State Attorney General 23:38is currently introducing also for essential stuff that is further up the value chain 23:43rather than just the essential consumer facing stuff I think could be really helpful because this is not to say that prices cannot 23:50go up at all if this kind of emergency happens and shipping companies have higher costs because things get complicated. 23:57But it's to say that they don't get these perverted incentives of having freight rates 24:03that increased multiple times over, which I think would actually also give them more incentive 24:08to get out of the blockage as as opposed to basically profit from the situation. 24:15Wait, so just on this point, can you talk to us a little bit about investment? Because the classic argument against some sort 24:23of windfall tax or price control would be, well you don't wanna artificially bring down the prices, 24:29you want people to make a ton of money and that way they'll invest more in their business and build out capacity and eventually 24:36the additional production is gonna be the thing that maybe starts to resolve the bottleneck and bring down prices. 24:42How does that work and is that a viable critique of some of the measures that you're talking about? 24:48Well, I mean first of all I would say that hiking interest rates is a recipe designed to bring down investment, right? 24:55So if we are talking about different ways of fighting inflation, then I am more worried about the interest rate hiking policy 25:01than I am about an emergency price gouging law or an a national emergency win 25:06for-profit tax or something like that. But also we have to see that if we are talking about price over volume, 25:11then we are in a situation where with lower volumes firms can make more money, right? Which means that they 25:17are basically contracting their capacity. And I think that if we look at the oil sector, 25:22which on my mind has been a very important element in this inflation story, 25:28that it's quite clear that they are saying very explicitly on the earnings calls that they are taking a disciplined 25:34approach to investment because they are reaping record profits, as they have reduced capacity. 25:41Everyone remembers 2013 and the big expansion and they don't wanna repeat that. Exactly, exactly. 25:47So it's not necessarily the case that if you can, I mean if you have learned that you can actually reap record profits 25:54when your supply is constrained, that this then encourages you to have a lot of redundant extra capacity 26:01or to hugely expand your capacity and therefore go for big investments. Where there are areas where we are particularly worried 26:10about curtailing investments with these kind of policy measures. I think you could have a policy 26:18that basically stipulates that if you are investing in like let's say green technologies, 26:24like let's say you you you are using the crisis a moment to upgrade your technology 26:29to become a low carbon manufacturer or something this, that you could have a tax write off 26:36for these kind of investments that we really want, that we want for a green transition that would not count towards the ways 26:41in which your windfall profits tax is calculated. So that in this kind of situation these firms 26:47might still have an incentive to do price over volume, but at least they would use the money that they get to invest in the stuff that we really need 26:54to make our economy more resilient rather than to buy back shares or do these kind of things. 27:00You know, it's interesting going back to this point that part of the impulse or part of the expectation comes from investors 27:07themselves and these sort of expectations. You're gonna push price too. You're gonna push price too. 27:12Do you think there's any element here where corporations themselves would like to get outta this game, 27:19that a sort of like third party administrator of supply of price of investment comes in and actually like solves a problem for corporations 27:27so that they get off this treadmill? Because one thing that I think about sometimes is any individual company may benefit 27:34from higher prices and higher margins, but on the whole a series of like Fed rate hikes 27:39to hike inflation is not great for stocks, which is how most of these executives get paid. 27:45Yeah, absolutely. I think there is like on the one hand a lot of coordination, right? With these price hikes. On the other hand there's 27:51a lot of coordination failure if you want. So because there are outcomes of this process that in some sense not sustainable, right? 27:58And actually if we look at what happened after World War I, when you had like kind of price hikes 28:04coming out of a bottleneck kind of transition from war to post-war economy, 28:09you had a very short lived boom that was very inflationary and then at a sharp turn into a deflationary recession. 28:17I don't think that such a sharp turn is in the cards because now we have these very concentrated sectors 28:23for most of the economy, which means that in these sectors firms are price makers 28:28and they tend to not lower prices in these kind of sudden ways in which we would see it in commodity markets 28:34or price taking markets. So I'm not so worried about this sudden turn as I would've been in a different setup, but nevertheless, 28:41yes it does trigger, it does trigger rate hikes, it does create a situation where I think a lot of corporate 28:49leaders are also nervous, like how far can we take this? It's like it's a bit like you're in this gambling game 28:55where you keep winning but you kind of don't trust. And everyone seems surprised that it's actually paid off this much for so long, right? 29:02Yeah, everybody seems to be really surprised that, I mean that, yeah, so the degree of coordination on that front 29:08has been totally surprising. But then you can also not chicken out, right? I mean we saw when Walmart for very short blips of time 29:15was making announce that they are discounted and that they are not going to play this price hiking game 29:21and then they had this share selloff, right? So I mean there's also like kind of a discipline from financial markets to keep doing this, 29:29but at the same time it's kind of clear that maybe it cannot keep going. But also we have to see that if we look 29:36at the data of changes in profit margins, it's very roughly speaking about two thirds of sectors 29:45that benefited and one one third or so that did not benefit. I don't have a very clear picture yet 29:50like how this distribution works. But in any case, we know that there are also sectors 29:57and that there are firms that are suffering pretty badly from this, right? And if we think of a capitalist economy 30:03as being coordinated by the profitability of different things, right? 30:09As the most important signal for capital allocation and this profitability gets kind of random 30:15because in some sectors firms can play this prize of a volume game and then some other sectors it 30:21might be more difficult to pour this off. And this doesn't have reasons that are necessarily tied 30:27into the entrepreneurial genius of one firm versus the other or the necessity 30:35for society for production of one thing over the other. But it just has to do with whatever specific consolation enabled these kind of price hikes. 30:43And I think we also really have a problem, right? If profitability becomes random. Right? 30:48So maybe like the egg companies do really well for some reason 'cause everyone's heard about bird flu for instance. 30:54We did a whole episode on it. And so all the egg companies raise their prices at the same time and make a lot of money. 31:00But meanwhile there's some, I don't know, software startup doing something really cool but they can't push through 31:06the same kind of price increases. Absolutely. And even like between product lines in individual firms, 31:13like if you look at what happened in the car sector, right? Where suddenly because I mean there you actually 31:19had a real physical bottleneck and car companies decided to only, I mean not only but predominantly produce higher end models 31:30that then resulted in a situation where all these cars that normal people are driving became 31:35basically not available on the market, right? Which is an outcome that is in many ways undesirable 31:41because then maybe people can't make it to work because they can't afford a car, which then like kind of makes the labor market less fluid in a situation 31:48where we already have labor shortage in certain areas. So, but yeah. So since we're on the topic of capital allocation 31:55and capitalist economies and how it's supposed to work, can we maybe talk about a slightly less capitalist country, 32:04the first time we ever had you on the show it was to talk about China and I'm wondering if you contrast and compare inflation in the West, 32:14and Europe and the US, with what's going on in China, it does seem like although there are some pockets of high prices in the East, 32:21it does feel like on the whole it's less of an inflation story. 32:27So what are you thinking about in terms of that comparison? Yeah, I think it's really an important thing to look at. 32:35I think we haven't discussed this like generally enough that there has been really this pretty dramatic divergence 32:40between Europe and the US with this high inflation in China with almost a deflation kind of problem in some stretches. 32:47I think of course it has to do with the different timeline of COVID. I mean no question about that, right? 32:54I mean they have had shutdowns when we were not in shutdown and they were open when we were 32:59in shutdown and so on, right? So clearly macro economically speaking, they are at a different point. They also did not have the kind of stimulus packages 33:07that they had in the global financial crisis and so on. So certainly the macro environment is different, 33:13but I think there's still the question of how did the global food 33:18and energy price shock arrive in China, right? And why did this shock not unleash similar 33:26kind of dynamics there. Right, it didn't seem to get propagated as much as it did elsewhere. Yeah. 33:32So I think there like different layers. So first of all, I mean for grain, which I think is an important one for food, 33:37they have of course a gigantic national reserve system, right? And they basically have to a certain degree buffer 33:45their domestic prices against international prices. So Chinese prices used to be, 33:50for important grains like rice, wheat, used to tend to be higher than the international prices, but stable. 33:57And when the international prices exploded, they kind of stayed broadly speaking where they were. 34:03And the way that they have managed that is that first of all they have 34:10a very high self-sufficiency rate, but I don't think this is enough because I mean the US has a very high self-sufficiency rate, right? 34:16It's even like a major exporter. Germany for example, also has a very high self-sufficiency rate. It's also an exporter, 34:21but still these international price movements have arrived right in China. They have not because the import quota 34:30is very strictly managed and it's basically a situation where most of the imports are managed 34:36by a very large state owned company, COFCO. And then domestically. 34:43So in that sense the international domestic prices are not really as interlinked as they would be in other situations and domestically 34:49they still have a minimum purchase price. So that they basically ensure that wherever it's reasonable to cultivate 34:56with this minimum purchase price grain is being cultivated. And then they have these grain auctions 35:02where they would be adding supply to the grain market if there is a shortage from basically a state-owned reserve system. 35:09So in some sense they have for grain, what the US has with the strategic petroleum reserve 35:15just on a probably even much more gigantic scale. 35:20And I'm saying probably here because we don't really know the size of of the reserve. It's a state secret. 35:26Yeah, I think there's a strategic pork reserve as well, right? There is. That's my favorite one, 35:31whenever they replenish the pigs. The other SPR. Yeah, there's actually also a live pig reserve. 35:38In other words they're like state owned pork farms, pig, sorry, you can't have a pork farm. 35:45You only can have a pig farm, sorry, the state owned pick farms, they're frozen pig reserves 35:51and they are also like kind of attempts of the state. But again these auctions and I mean purchases 35:58and auctions to basically send signals into the market. So it's not really just about the physical supply, 36:06but it's also about like let's say there's a price hike for pork and then there's an announcement 36:13that the state is now doing a major auction of frozen pork and this is send sending a signal to all market players 36:18that this price hike might not continue, which then should encourage people to get rid 36:24of the inventories and thereby also add supply. So it sounds like, I mean we have our SPR and it was 36:31never really used as a price stabilizer. So in addition to all these vehicles like the strategic pork supply and the other grain, 36:37it seems like they also have practice in this that actually like unlike RSPR, which was sort of pivoted or like, 36:43oh we don't have to use it just for strategic purposes, that this is like part of like a more ingrained macro management there. 36:50Absolutely. And I mean the pork example is actually one where it doesn't work that great because hawk cycles are a thing, right? 36:57And they are a thing in China too, and you have like millions of small holders farming pigs. 37:02So you have very intense hawk cycles. So you can smoothen the cycle but you never get rid of it. 37:07But it's technically not at all simple, right? I mean you need to have basically a system 37:13that can store that stuff in a way that the pork that they sell is the pork that you want to buy and eat, right? 37:19You need to have agents that are able to purchase this on a relatively large scale. 37:24You then have to have these auctions that have to be professionally organized and you also have to understand the market really well. 37:30I mean, remember when there was an announcement earlier this year that the US was gonna buy back oil to replenish 37:38its strategic petroleum reserve and then oil prices started spiking, right? So you have to have a very good handle 37:44on how to communicate with the market, like when to say something about what you're doing and when not to say something about what you're doing. 37:51So it's quite demanding and a lot of things can go wrong. Yeah. 37:57And even in China where they do have practice doing this, I mean I remember with pork specifically after the African swine fever outbreak, 38:04they actually made the cycle even worse 'cause they told everyone ramp up production and then it was too much 38:10and then prices collapsed and everyone got out. And so it's just been going like seesawing ever since then. 38:16Absolutely. And it's actually been for the first time a situation where European pork importers have 38:23had difficulty selling in China because suddenly the prices collapsed in China and in Europe they were going up 38:30with the very high grain prices. The funny thing is, while I was in China, I was doing many interviews with people on inflation, 38:38including folks from the Word Bank, from the IMF, from major banks and so on. 38:43And eventually every single economist that I talked to started to talk about pork. Oh really? And they even have all these like jokes on pork. 38:50So they say like the CPI in China actually stands for the China Pork . 38:57That's great, I love that all the economists are viewing inflation through the lens of pork. Like we do with the oil here in this country. 39:03Yes, it's true. But can I ask a personal question, which is, you know, you mentioned, 39:08well we started off this conversation talking about how this idea of sellers inflation has really gathered steam in recent weeks. 39:17And you mentioned the "Guardian" article where you talked about price controls and I remember when that came out, 39:23you got a ton of criticism online, lots of Twitter people calling you various names, 39:31Paul Kirkman said some not very nice things. But since then we've seen price controls 39:37in Europe, we've seen on the subject of sellers inflation and maybe windfall taxes. 39:43We've seen the UK for instance, talking about capping grocery items and things like that. 39:50How do you feel about how this is sort of seeping into the the mainstream? 39:57Yeah, I mean maybe to add to your list, we have also of course seen the European gas price cap, 40:03which is an international, I mean transnationally coordinated kind of price cap and the oil price cap against Russian oil, 40:10which I mean in principle could be for all oil, right? I mean just in terms of the technicality of the price control mechanism. 40:16So yes, absolutely. It's been totally astonishing to me. 40:22The reason why I wrote this article at the time was because A, 40:27I felt that the debate amongst economists was polarized between those who were saying like, 40:34oh, we don't have to worry about inflation too much, it's just transitory. And those who were saying, oh, inflation's really a problem, 40:40therefore we have to hike interest rates yesterday. And I felt like there was a position missing there, 40:46which is like, yeah, we have very large price spikes and they're a problem. But if you have a fire in the kitchen, 40:52you don't set your whole house under water, but you try to put out the fire in the kitchen, right? 40:57So not as an apologies of price controls, but to say, hey, there is something sectorial 41:03that we can do and direct means of price stabilization can be an emergency measure to buy time 41:10when you are faced with these kind of crazy price spikes. Now the key word here I think is emergency measure. 41:17And my sense is that the more urgent the emergency became, 41:22the more acceptable these kind of measures ended up being. 41:28And I think that in Europe you can see this very clearly in terms of the reactions to the war, 41:35but then also like basically as it became colder, right? And the fear of winter just became very real. 41:44The perceived emergency became more intense and the willingness to take this 41:49kind of measures became greater. 41:55The sellers inflation story, I feel like it's related but also kind of 42:01slightly separate in the sense that the price control debate is really about emergency measures that you take, right? 42:08And the sellers inflation paper is really about how do we understand this kind of inflation. 42:14But I think the shift that we are seeing now that of course is not complete and so on, 42:20but that at least it's becoming more acceptable to think about other ways of understanding how inflation came about is kind of the first step that we need to take 42:28to move towards a different kind of economic stabilization paradigm that I personally think we really need 42:35in this age of overlapping emergencies. So it's been quite a wide ride but I guess talking today 42:43and it has been very wide so god knows what's gonna happen next. It looks like there has been some movement 42:51in a good direction in the sense that the discourse is becoming more open. And I think that an open discourse is really what we need 42:58if we are faced with these unprecedented situations because you cannot respond to an unprecedented situation 43:04by saying we have always known how exactly it works. Yeah. Isabella Weber, 43:10thank you so much for coming back on Odd Lots. Really appreciated having you in person as well. 43:15It was really fun. Thank you so much for having me. Thank you so much. So Joe, I always enjoyed talking to Isabella. 43:21It is crazy to see how quickly things seem to be changing in this particular area of discourse. 43:28Totally. And you know, I know we didn't really get into it, but I also just think that like the internet and Twitter 43:34and like it sort of cuts in both directions because you could put out an idea and get tons of abuse and backlash, 43:40but there's also like a really rapid way which ideas proliferate right? In a way I don't think would've happened in like, you know, 43:46a different era where you like wait like five years to get a paper, you know, referee it in a journal or something like that. 43:52But I'm fascinated as I think we both are by like how ideas like can move so fast and like, 43:57especially in the nature of crisis. Absolutely. And the other things that stood out to me are one, you mentioned this treadmill idea Yeah. 44:03Of like, you know, it sounds great companies raising prices in order to pad their profit margins, 44:09but at some point you have to imagine like there are some executives who get nervous about how far they can actually push this. 44:15I liked Isabella's point about like the gamble, right? Because at some point, like you could imagine where you like go 44:20with a pricing strategy and you really mistime it and suddenly you really do like lose share 44:25in like a meaningful way, right? Or you damage your brand, which seems plausible. It's like, oh this company is greedy at a time. 44:32And so it sort of depends on like the sort of coordination. And I do wonder whether like executives 44:38would ever like off the treadmill. In some way, right? They're sort of, they're pulling the lever every quarter 44:44and so far it's paid out each time, but maybe one day it won't. The other thing that really stood out to me was, 44:51I mean what we're talking about is basically the need potentially for a more interventionist government 44:57in the economy in one way or another. Whether it's, you know, trying to smooth out some of those production cycles, 45:04trying to smooth out big price spikes. And I feel like that's always going to be controversial, 45:12particularly- It's always gonna be political. It's always gonna be political, particularly in the US, but it is, you know, that said, 45:18we have seen some inklings of it with, for instance, the strategic petroleum reserve. 45:23And I think this is really the, like to my takeaway from all this is people look at this greenflation story, whatever, 45:29and they're like, yeah, but inflation is still really high. And so the Feds, we gotta do something about it. 45:34And I think to Isabella's point, like, 45:40it's important by looking at different dimensions and not just saying, oh, it's 'cause of wages or not just 45:45'cause of like rates or money supply. It allows us like this sort of like mental space to open up. And some of them, like we may not have the tools, 45:51like we may not have the tools right now to like stabilize, keep grain prices stable. We don't have the sort of equivalent, 45:57but like in thinking about like, is rate hikes really gonna be the best way here? Is the cost in terms of like general welfare 46:03and employment worth it? If this is really not what the story is about. I think it's still like very useful from 46:09that perspective is like, okay, how good are these tools? And if we're gonna use a blunt tool like, right, 46:14how much damage are we gonna do with this like, mediocre tool. Well again, going back to the investment point. 46:21If the issue is a bottleneck in production, then maybe you don't wanna raise 46:26the cost of investment and production. Do you wanna raise the cost of a real estate developer at a time when rent is one of the highest, 46:33yeah things like that, yeah. You know what Joe, I've decided I'm gonna base my entire personality going forward on campaigning 46:38for a strategic pork reserve in the US. But it's hard there too I guess, 46:43even that isn't foolproof. But yeah, I support that. Bringing home the bacon. That's my motto. Stimulizing the bacon. 46:49Shall we leave it there? Let's leave it there. All right, this has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. 46:54You can follow me on Twitter @TracyAlloway. And I'm Joe Weisenthal. You can follow me on Twitter @TheStalwart. 47:00Follow our guest, Isabella Weber on Twitter @IsabellaMWeber. Follow our producers Carmen Rodriguez @CarmenArmen 47:08and Dashiell Bennett @DashBot. And for more Odd Lots content, go to bloomberg.com/oddlots where we have a blog, 47:16we have transcripts, we have a newsletter that comes out Friday. And check out the Discord, discord.gg/oddlots, 47:22hang out 24/7 with other listeners and talk about all these topics. And you should stream Bloomberg Originals on Samsung TV, 47:30Roku, Apple, any other of these streaming platforms. And make sure to tune in on Bloomberg TV at 10:00 p.m. 47:37Thanks for listening and watching.
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