It’s Not the Greedy Grocer

It’s old news that groceries are expensive. When we were first learning how to talk most of us asked why if our parents told us to do something that interrupted our fun; such as, “Get that snake out of your sister’s shoe.” Is anyone asking why groceries are expensive? Many people blame greedy grocers, processors, and farmers.

Put yourself in any of these positions. If you were a farmer and priced your tomatoes at a dollar when it cost 50 cents to deliver one, do you think a neighboring farmer would sell his for 75 cents or dump the unsold inventory in the compost pile? It’s the same for grocers and any middlemen along the way.

If you have a humid and rainy summer and your tomatoes suffer severe blight the supply would be smaller. Your neighbor might have no tomatoes at all. Over the years all of us have suffered losses like this. When you’ve mulched to eliminate soil splattering onto the plants, planted resistant varieties, and kept them widely spaced, you get a decent yield in spite of the weather. This is where you make up for those bad years. You don’t sell tomatoes for 75 cents if there are no tomatoes to be had anywhere else. Imported tomatoes cost $1.50. You could get $1.50 because locally grown fresh tomatoes taste better than imports.

If we are smart and ambitious we can afford the $1.50 tomato. If we only work hard when the boss is around, call in sick because of a hangover, or don’t get along with co-workers, we might be part of the 64% of Americans living paycheck to paycheck. Living like that leaves us vulnerable to illness, a family emergency, or being laid-off.

So far I’ve been assuming that the value of money remains constant. I bought a brand new VW Bug for $2,000 in 1967. The cheapest new car we can buy now is $18,000. That price increase is not the result of a greedy car company. The money we spend on the car is worth less because there is more of it in circulation, like when we have a hot, dry summer and tomato yields are high. Prices would be low because of a plentiful supply.

When people debated issues or explored puzzling questions this conversation would naturally lead to “Why?” But the lure of victim-hood or villain-blaming is strong. Relying on authorities and experts is easier than critically tracing answers to their source. The simple answer is that more dollars and less tomatoes equals higher priced tomatoes.

But why are there so many dollars? The Federal Reserve “loans” dollars to big banks to stimulate the economy. The dollars are printed out of thin air. The increased number of dollars in circulation reduces their value so it takes more of them to buy anything than it did when less money existed.

The Federal Reserve was created in 1913 as a way for former pacifist Woodrow Wilson to fund our entrance into World War I in spite of strong and widespread opposition by the American people.

With the recent bankruptcy of some big banks it is way past time to explore the mysterious banking industry. We’ll visit that in the coming weeks. It’s more interesting than one might think.