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The Boston Globe found that prices for Christmas trees in New England were up 10 percent and in some cases even double last year’s.
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 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 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: “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.
