Inflation is caused when the government spends more than it takes in with taxes and borrows and prints money in order to spend more on government projects, foreign aid, wars, or entitlement and welfare programs.
The great economist Milton Friedman described Inflation as “… a monetary phenomenon. It’s always a result of too much money, of a more rapid increase in the quantity of money than an output.”
Friedman explained, “If you listen to people in Washington, they will tell you that greedy businessmen produce inflation, or it’s produced by grasping unions or spendthrift consumers, or maybe it’s those terrible Arab Sheikhs who are raising oil prices. Now, of course, businessmen are greedy. Who of us isn’t? Trade unions are grasping. Which of us isn’t? And there’s no doubt that most consumers are spendthrifts.
But none of them produce inflation for the very simple reason that neither the businessman, nor the trade union, nor the housewife has a printing press in their basement on which they can turn out those green pieces of paper we call money. The only cure for inflation is to reduce the rate at which total [government] spending is growing.”
Of course, in order to combat the effects of inflation on the consumer and their demand for products and services, companies must either raise prices or try to keep prices relatively the same by giving the consumer less…
That’s what’s called “shrinkflation.”
Shrinkflation is when you buy the same items and pay the same price, but the packaging is smaller.
Some examples include:
- Coke downsizing its 385ml bottle to a 330ml bottle
- Kleenex being reduced from 65 to 60 tissues
- Bounty paper towels going from 165 sheets per roll to 147
- Keebler Rainbow Chips Deluxe cookies going from 3 M&Ms per cookie to 1 M&M per cookie
Shrinkflation directly results from government-created inflation…
It’s like a hidden tax… You get less for your money.
Will things get better in 2024?
Here are 4 reasons inflation will be worse in 2024.
1) Inflation will continue to rise
There seems to be no regard by DC politicians or President Biden to stop spending money we don’t have.
And as long as they have the Federal Reserve’s printing press to print money for them to spend, prices will rise.
The constant rise in consumer prices has inflation reaching 40-year highs, even though the Federal Reserve is raising interest rates to try to control it.
Everyone who buys anything can see that everything is getting more expensive.
- Bread is up over 17% from last year
- Lettuce is up over 24%.
- Milk is roughly 30% higher
- Eggs are up a whopping 70%
2) Biden’s war on fossil fuels and energy will continue
Cheap, abundant, efficient energy makes the world go around. When oil prices are low, it reduces the cost of everything we manufacture and transport.
Biden’s war on oil and natural gas to transition America to alternative energy by government mandate is causing the price of everything to go up. And given the volatility of the Middle East and in Ukraine, oil prices will go even higher as demand increases but output decreases.
Add the inflation caused by government overspending, and it makes the price of things go up even higher.
3) Rising inflation = intense market competition = Probable Shrinkflation
As the cost of things skyrockets due to inflation, consumers cut back on spending.
This means the fight to get consumers to spend money on one product versus another becomes even more intense, especially in the food and beverage industry.
Since consumers are able to access a wide variety of competing products at lower price points, namely non-name brands, name brands need to cut prices or shrink their packaging in order to maintain their profit margins without alienating the customer.
A recent marketing study revealed buyers are more sensitive to changes in price than to changes in size. Since these downsizing changes are not as noticeable to the buyer, most companies choose to downsize their packaging contents, taking a “caveat emptor” approach—meaning, let the buyer beware.
4) Some examples of Shrinkflation
Since Biden took office and inflation started rising to 40-year highs, we’ve seen shrinkflation occur more frequently. And as inflation will most likely continue to rise in 2024, shrinkflation will continue as well.
Here are some examples of shrinkflation currently on grocery shelves.
- A 12-roll of Bounty paper towels dropped from 98 per roll to 90 sheets, a decrease of about 8%.
- Oreo Double Stuf cookies “family size” package shrunk from 1 pound, 4 ounces to 1 pound, 2.71 ounces.
- A 12-pack of Charmin Mega toilet paper lost 22 sheets per roll but still cost $14.29.
- Post’s Honey Bunches of Oat cereal “family size” box went from 23 ounces to 18 ounces.
- Sun-Maid Raisin went from 22.5 ounces to 20 ounces.
- Chobani flip-lid yogurt went from 5.3 ounces to 4.5 ounces, a 15% loss
Ever since British economist Pippa Malmgren coined the term “shrinkflation” in 2009, consumers have “wised up” to what’s going on.
And although they may think that the practice is a bit “shady,” consumers have to grin and bear it until we can get a new president who’s economically literate and will cut government spending.
As Friedman said, “if you’re upset you’re paying just as much for less cereal, toilet paper, tissue, and countless other products, that’s fine. Just make sure your anger is directed in the proper direction: at the people who “flooded the system with money,” and those who directed them to do so.”