The Latest from the Prospect
 ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌


 

View this email in your browser
<[link removed]>

**DECEMBER 12, 2022**

Kuttner on TAP

****

****

****

****

****

****

****

****

**** Jay Powell as Scrooge

Higher interest rates and the cost of Christmas trees

Is nothing safe from inflation? There have been several reports of
dramatic increases in the price of Christmas trees.

The Boston Globe did a deep look
<[link removed]>
at New England prices of trees and found price hikes of at least 10
percent and in some cases a doubling of last year's prices for very
fancy trees. What accounts for the inflation grinch?

Several factors: Droughts reduced harvests. Fuel costs increased costs
of transporting trees to retailers. In the aftermath of the 2008
recession, growers planted fewer saplings. The

**Globe** cites price increases in mundane items such as fertilizer,
chain saws, bailers, and twine.

Okay, gentle reader: Think hard about this. The Fed keeps raising
interest rates on the premise that retail prices are rising because of
excessive demand. But does anyone believe Christmas revelers are bidding
up the cost of trees because consumers are feeling flush? Or that higher
rates will somehow cure droughts or cut costs of fuel or chain saws or
twine? If anything, rising rates become one more source of rising costs
for growers, retailers, and suppliers.

Multiply Christmas trees times a thousand other consumer products where
the problem is the increased cost of supply inputs, and you appreciate
what is bogus about the Fed's economics.

One factor that the Fed underappreciates is the tendency of sellers to
take increased markups in an inflationary environment because consumers
expect to pay more, and everyone just blames "inflation." As Nobel
laureate Joseph Stiglitz documented in a recent co-authored paper
<[link removed]>
for the Roosevelt Institute, the average markup (the price charged
relative to marginal cost) was 26 percent in the years between 1960 and
1980, and has been steadily rising ever since due to concentrated market
power. In 2021, the average markup was 72 percent above marginal costs.

Christmas trees would seem to be the opposite of market power-plenty
of farms, plenty of retailers. But even this quaint mom-and-pop industry
is becoming ever more concentrated, as

**The Wall Street Journal** reports
<[link removed]>:
"In 2017 the U.S. Agricultural Census found the smallest 10,000 farms
combined had about 34,000 acres and sold 800,000 trees. The largest 400
farms managed 134,000 acres and sold nearly 10 million trees."

So blame rising prices on accidental supply shocks, increased corporate
concentration-and the Fed's perverse determination to make things
worse.

A joyous yuletide to all.

~ ROBERT KUTTNER

To receive this newsletter directly in your inbox, click here to
subscribe.  <[link removed]>

Follow Robert Kuttner on Twitter <[link removed]>

[link removed]

Democrats Don't Have to Settle for Battling to a Draw
<[link removed]>
With stakes so high, challenging our Democratic establishment
'extremists' and cultural elites is a start. BY STANLEY B. GREENBERG

Can Progressives Govern From the Minority?
<[link removed]>
Greg Casar, a former city council member from Austin, Texas, says yes.
BY JAROD FACUNDO

Rail Companies Can't Handle Traffic From Mississippi River Drought
<[link removed]>
Low water levels have pushed shippers who typically use river barges to
use freight rail. But decades of strangled capacity makes rail a bad
bet, too. BY LUKE GOLDSTEIN

The Crypto 2008 Speedrun
<[link removed]>
It took about half a decade for crypto magnates to re-create all the
problems that blew up Wall Street in 2008. BY PROSPECT STAFF

 

[link removed]

Click to Share this Newsletter

[link removed]


 

[link removed]


 

[link removed]


 

[link removed]


 

[link removed]

YOUR TAX DEDUCTIBLE DONATION SUPPORTS INDEPENDENT JOURNALISM
<[link removed]>

The American Prospect, Inc.
1225 I Street NW, Suite 600
Washington, DC xxxxxx
United States
Copyright (c) 2022 The American Prospect. All rights reserved.

To opt out of American Prospect membership messaging, click here
<[link removed]>.

To manage your newsletter preferences, click here
<[link removed]>.

To unsubscribe from all American Prospect emails, including newsletters,
click here
<[link removed]>.