Meet Kevin vs. Sasha: Who Won?

We had a very "interesting" couple of days.

In what seems like a lifetime ago, we saw stocks drop after the disappointing CPI data Wednesday. Yesterday morning, stocks went up again into a better than expected PPI data. Narratives have flipped twice, in a span of 48 hours.

Meanwhile, in YouTube finance land, a British YouTuber that goes by the name Sasha, made a response video to the CPI data, blaming U.S. companies for increased inflation due to corporate greed, basically calling for price controls on energy and insurance companies.

Meet Kevin responded to that video with a detailed response video of his own, which had a complete 180 degree view, disagreeing with basically everything Sasha said in his video, and since I know both gentlemen, I've been asked to share my opinion on who won the debate.

First of all, we need to ask why understanding inflation is so hard. How can we have 2 people who understand the topic completely disagree on everything?

The answer is simple: inflation is VERY hard. In fact, it is probably the hardest element to predict for economist, and have been this way for ages.

In Sasha's video he claims that "corporate greed" is the source of current inflationary pressure, let's address that argument:

Milton Friedman, who was the GOAT of economics and won the Nobel Prize in 1976, and focused a lot of his work on inflation, famously stated, "Inflation is always and everywhere a monetary phenomenon," meaning that it results from an increase in the money supply relative to the availability of goods and services.

Fridman showed the world that the root cause of inflation is too much money chasing too few goods, not the pricing practices of companies themselves. slow down money printing and inflation is gone, speed it up and it will come back and bite you in the ass.

Think back to when inflation started: the COVID lockdowns, the insane money printing and the wild spending of consumers which also bled into the stock market. Money supply increased, which led to higher spending, and too little goods and services being chased by too much money.

Sure oil prices impact CPI, and companies will always try and "squeeze the lemon" from consumers, that is true, but those are contributing factors, not the root cause.

The U.S. government wants to keep people happy, same people who want all the infrastructure, education and services to be provided by the government, but don't want to pay more taxes. The U.S. government prints more money to fund that, inflation goes up. Same story for decades.

Politicians love to blame OPEC or corporate greed to shift the blame, and they have been doing it for ages. It has a nice sound and its popular, but when an economic commentator is buying into that view, it clearly shows a lack of understanding of what inflation is and what price controls can cause.

Implementing price controls can lead to major distortions in the market by creating shortages which would exacerbate the VERY SAME problems that price controls are intended to solve. At the same time companies might respond to price caps by reducing the quality of their products to maintain profit margins, so caping the prices may sound nice, but it shows a glaring lack of understanding of how inflation works.

Instead of price controls, controlling the money printer as a more effective way to combat inflation. It's that simple.

Given that Sasha's argument is largely based on the "corporate greed" logic, which sounds nice but is nothing more than a smoke screen, I have to give the nod here to Kevin, as his analysis was much better researched, structured and presented.

My 2 cents.

Tom