I'm kind-of an amateur, but I'll do my best to explain~ >:3 As such, there may be some mistakes~ >_< Treat this as a laywoman's explanation~ ^_^ It all depends on how far back you want to go honestly~ >_<
basically, the value of money almost always goes down~ This is called inflation~ There are a lot of reasons for it, which will be explained later, but money printing is the most obvious~ The main reasons for why our overlords want inflation are debt, the means of production, and asset values. If you are in debt for a long time with a low interest rate (3% or less), the value of your debt will decrease (even if the amount of money owed increases). If the value of money is decreasing, then, naturally, people want to get out of money as fast as they can. This can be done with things which are difficult to produce more of: assets, like gold or land, or stocks and bonds (explained later).
If the value of money is always decreasing, and the value of assets is increasing, then, it is better to spend more money now in order to get more money later. Hence, a company may hire more workers; get more tools for those workers; and research new, better production methods or goods to sell (the means of production), so they can maximize profit by producing more products/assets in the long-term. Likewise, a company may sell a part of their company to you, a stock. This is basically the same thing. You are an investor, and you are giving them money now to invest in their business with the expectation that their company value will increase, and your part of their company will be worth more in the future.
Essentially, inflation fuels company growth, and if it were reversed with deflation, theoretically, unemployment would increase even higher as businesses would stop wanting to hire anymore and invest in themselves, and companies would hold onto their money as the physical money becomes more valuable than producing more stuff. After all, the same amount of money will be worth more in the future.
You may be familiar with supply and demand. If demand goes up, then, the price goes up. If supply goes up, then, prices go down. If people have more money, then, the amount of money that a person will be able to pay for said good goes up~ Likewise, if people have less money, then, the price goes down as people will hold onto it more carefully~ even tho increasing prices still reduces the numbers of people who can buy a good, you may still receive more from those who still buy it~ this is the theory behind the shift to goods more frequently becoming "luxuries"~
However, you can't just give people more money as that'd make the value of your money decrease via inflation. Instead, you can employ some trickery!
btw, yes, large enough businesses can just invest in assets to make money rather than enacting increasingly cruel business tactics~ In fact, most of them already are~ I've heard it described that many fast food places' value mostly comes from the high value of land in the center of commercial districts (assets) rather than the actual stuff they make (food->money). However, as a leader of a company, you are always incentivized to make as much money as possible and are therefore encouraged to do whatever awful things to get it as described below:
interestingly enough, as the CEO (the leader) of a company, you actually still have a boss~ remember all those people who own stocks? They are called shareholders, and if they own more of your company than you do, then, they can legally fire you or overrule your decisions~ this is the reason why people have been fired from their own companies (i.e. Steve Jobs)~ This means that you have to please them by continually increasing the value of your company~ as the CEO, you must ensure the stock value always goes up~ otherwise, you risk your own livelihood as CEO~ >_< in addition to this, income tax, how the government makes most of its money nowadays, increases as the amount of profit you get each year increases~ This applies for both corporations and people~ This is a reason why corporations try to maintain thin or negative profit margins as then, they can avoid paying taxes~ In addition, CEO's can be paid in their own company's stock~ Stock is non-taxable until you sell it and get the cash value out of it~ As such, rather than getting 50% of all your money taxed, you can instead pay yourself with your own company's stock, that you use as collateral for loans (not taxable as this is debt rather than income), which you can instead use to purchase stuff like assets~ As such, if your stock value ever decreases, the value of your money decreases, and if the bank ever demands all the money you owe them back when that decreases, well, then, you're toast! As such, CEO's are incentivized to ensure that their business grows in value no matter what, to keep their job and to keep their money~
Anyways, with that long tangent aside, first up for trickery is advertising! The basic premise of advertising is where you tell people about your product or about why it is better than alternatives with the goal of being able to get people to buy it~ Given this is the case, you may wonder why large corporations make up the vast majority of advertising~ It's because they can essentially get you to remember and desire their specific good and thus, be more willing to spend much more money on it than you would otherwise~ As such, they can charge you much more than what the product is actually worth to buy it~ The profit margins on things like soda are ridiculous as a result of this~ >_< ofc, ads cost a lot of money to make and run! As such, corporations may also buy data from data brokers (basically, any internet, social media, location, purchase data, etc. about you is harvested)~ Then, they will target ads at people who are most likely to buy the product given that they are given an ad for it~ you, the customer, by buying their product are thus paying for the advertising for it and for that company's purchases about you specifically from the data brokers as well~ >_< ofc, doesn't everyone pay the same rate for a product? Generally, yes. As such, even if you would buy someone's stuff without advertising, in many cases, you're paying for them to advertise their stuff to someone else.
Second up is targeted pricing! This is increasing the price for a consumer given their willingness to pay~ Note that this is not based on their ability to pay~ This is something airlines are particularly well-known for~ If they figure out that you must take a flight via data harvesting your past activity, they will jack up the prices on it, so they can earn a greater profit~ However, it goes far beyond that~ Railroads famously did this back in the 1800s based on whatever info they could get about you and got the government mad enough at them to begin enacting regulations~ ofc, it's running rampant with tons of things nowadays so... Maybe the government should do something about that again~ ¯\_(ツ)_/¯
Anyways, while different, a similar kind-of thing is actually done for all "needs"~ For example, living in general requires food, water, clothing, and shelter~ Living when your health is declining also requires medical care~ Being able to get to work in order to get money to fulfill these needs requires transportation (i.e. a car and gas)~ All these have "inelastic" demand~ They are required goods for a person to buy to survive and will always have some level of demand for them~ As such, if a small number of corporations were to get together and agree to increase prices, shut down competition (via lobbying for regulations [explained later], or by lowering prices below production costs on limited products for a limited time to force other companies out), or reduce supply, they will usually get more profit than before as people can't just stop paying for food or you know, bleed out until they die~
People have much more freedom of choice with their wants (entertainment): TV, video games, movies, plays, books, etc.~ There are nearly infinite options, so the prices here will be much closer to the cost it is to produce the item unless brand recognition (like Tom Cruise or Nintendo), overall enjoyability, and/or advertising increase demand, and thus, prices~ This is called "elastic" demand~
Beyond needs, there are also things that are necessary parts of the production process like electricity, oil, wages, and computers (including parts like RAM)~ These are your base production costs, and you can't really get rid of them very easily~ All goods take money to produce~ As such, any good will have some level of cost in its production process~ While companies have been pretty good at suppressing wages per unit of productivity, they have been less so at reducing the prices of electricity, oil, and RAM~
There are industry-specific reasons for all of these, but basically, oil and electricity are heavily regulated within the US, resulting in higher prices from that, but they are also very difficult for a corporation to get into to compete with already-existing corporations via lower prices due to the absurdly high cost of setting up factories, power lines, pipelines, oil refineries, etc.~ This is described as having high barriers to entry~
Additionally, oil and RAM prices both operate using cartels~ This is very similar to a monopoly~ Instead, of 1 company owning all of 1 good and being able to charge whatever they want for it (a monopoly), a few companies do (a cartel)~ Essentially, as a result, the few giant corporations in the industry purposefully limit supply on a necessary good for production of which there is a high cost (barrier of entry)~ Since the entire economy would halt if people stopped buying them, just like the human body would without food, people still continue to buy them in spite of the artificially-high prices~ This is illegal, and it enriches a few at the expense of literally everyone else (which tbf, this entire post is about)~ OPEC (an international group of countries) controls the oil prices, and the RAM industry seemingly has managed to "fool" the US government, claiming that they aren't a cartel again (more on this later)~
While unconfirmed, given the mechanization of agriculture (big machines rather than just hoes and seeds), the commercialization of seeds and GMO's (i.e.: you must always buy seeds every year and can't just re-use whatever your plants provide as they are now "intellectual property"), and higher land costs (meaning higher property taxes, which are based on land costs), this means that agriculture now has much higher barriers to entry (often involving debt)~ this makes it ripe for cartels between large agricultural corporations as small farmers' costs will always be higher (due to being able to produce less to make up for the higher costs of entry and running a business)~
Third up is tariffs! Essentially, tariffs place a tax on imports (goods from other countries)~ Unfortunately, most of the goods sold within the US, even including food, are produced in other countries (most notably, China)~ That means that these goods will be taxed when entering the US~ Tariffs are generally done to protect home industry~ however, if all the people knowledgeable about an industry are overseas, or more frequently, the wages overseas are cheaper than the tariffs, companies will just tank the cost and/or pass it on to consumers (especially with "needs")~ for companies whose foreign competitors get tariffed, they may choose to raise their own prices in order to reap the profits within the middle of how much their costs are and the minimum foreign competitors can charge while still making profit~ This and the Cash for Clunkers programs have been big reasons for why cars cost so much nowadays and why American car brands are also notoriously unreliable~ keep in mind that if transportation costs rise, all costs rise~ >_< oh, also, if you have a job at one of the production companies benefitting from tariffs within the US, your salary may rise as your company gets more money~ However, those working in jobs disconnected from that like government or service jobs do not benefit whatsoever~
Next up are loans and debt~ if you can't find any or enough investors to fund your business, you may have to turn towards a loan and debt. This is where someone gives you money now, and while you have to pay them more later, theoretically, you should be able to use that money they gave you to have more by that later date. Ofc, this is where most of us find ourselves as it's difficult to secure investors who we will not be giving anything back to for a medical surgery and theoretically impossible to sell a part of yourself to someone else in exchange for affording medical surgery. If this were possible, it'd be called slavery.
As stated before, this is theoretically a good idea as long as the interest rate is low (3% or less). Interest rates are determined by how likely you are to pay something back as if you're very likely (you have a high credit score), more places will be more willing to provide a loan for a lower rate than some other place might provide you as they practically will make money off of you. However, if you're less likely (you have a low credit score), the bank wants to ensure that it can squeeze out as much as it can from you before it obliterates your credit score and seizes your house, car, property, any other collateral you had (anything you gave them explicit rights to seize as part of the loan agreement), etc.~ This is the reason behind the buy now-pay later places as they essentially own your future paychecks until you pay off whatever ridiculous interest rate they gave you if you're not able to pay it off once.
In the distant past, being in debt was a really, really bad thing and looked very poorly upon~ Nowadays, it's viewed as practically normal (just look at all the predatory APR rates, buy now-pay later scams, mortgages, car loans, student loans, etc.)~ As it's viewed as more normal nowadays, you can simply "take out a loan" to pay for things you can't afford otherwise~ as such, corporations are encouraged to increase prices as the amount of money that can be demanded from you is increased as you can "simply" take out a loan to pay for whatever you don't have on hand~ >_<
Another process that negatively harms the consumer is corporate mergers and raiders~ Corporations can merge their companies to create a larger, consolidated company~ While this is good on a micro-scale where they will have to pay less base operating costs, this is much, much worse regarding giant corporations~ Generally, this involves them buying out their competition, so they can either just sell their product instead (similar to Google Video being replaced by YouTube) or get rid of the opponent's product in order to create a monopoly on the market~ if the products are sufficiently similar, they might even threaten the easy money of a buy-out and/or employment instead of a lawsuit~ since there is less competition and/or supply, whatever companies remain can just charge more for their services or products~
Corporate raiders, more positively referred to as private equity, basically go around buying other companies, extracting as much value as they can out of them as fast as they can and leave them as husks of what they used to be before~ yes, this does happen in the healthcare industry too unfortunately... Basically, the consumer is left with a far worse and more expensive product or service and if that specific company ever gets shut down for no longer being profitable, no doubt the other companies still left will jack up their prices in response to the large reduction in supply~
Alright, now to the Federal Reserve~ A big thing behind inflation in general within the US is US monetary policy as operated by the Federal Reserve~ The Federal Reserve is partially public and partially private~ Notably, the major banks own parts of the Federal Reserve, the institution, which is supposed to regulate them... Anyways, prior to 1932, the US was on the gold standard, meaning that the US government had to possess a gold reserve equal to the amount of money in circulation~ However, if they permitted rapid inflation by going off the gold standard, they could then encourage the remaining corporations and hire more workers~ The US however never went back on the gold standard, and in 1971, it ended the ability to exchange gold for money completely in order to decrease unemployment again then too~ as such, the US government can theoretically print as much money as it wants~ The impact of this on inflation can be seen if you look at any of those charts which show the value of the dollar since 1932~ >_<
Anyways, the government is partially restricted by the Federal Reserve tho! To pay for its expenditures, the US government also goes into debt like people do~ While you can't exactly seize a country, if a country were to ever default, nobody would ever be willing to lend them money again, meaning that they'd have to raise taxes, cut benefits, and everyone who could would leave, essentially leaving it destitute~ This government debt can be bought as bonds~ Notably, the Federal Reserve, controlled partially by private banks, buys these too, and that's how money is made~ This is called quantitative easing~ Each time a dollar is printed, it is produced as debt, meaning that the government has to pay more interest, meaning that they have to eventually raise taxes or decrease benefits~ ofc, this hurts you while devaluing (decreasing the value of) your money too~ Increasing taxes or decreasing benefits notably decrease the benefits of investment and causes deflation, but well, we can see the government is just embracing debt instead~ Notably this doesn't even require paying for the materials to print physical money anymore due to the increase in the digital economy, completely disconnecting the money supply from productivity~
Another thing regarding the Federal Reserve is that it sets interest rates~ These are the interest rates on government bonds, probably the most stable debt to own with the assumption that the government doesn't default~ as such, changing the interest rate has wider ramifications across society~
Also, regarding the Federal Reserve, it also sets reserve requirements~ A reserve requirement is basically the amount of money that a bank must hold onto in order to pay those wishing to withdraw funds~ Over the past 60 years, this usually was about 10%~ if the reserve requirement is 100%, banks would have to hold onto all money they produce, meaning that only however much money is produced is in the "money supply"~ If it is less than 100%, it is called fractional-reserve baking and is how much a bank can loan out of your money to people seeking a loan~ This also means that more money than has been produced (and stored at your bank) is in circulation~ If it's 50%, then, that means that theoretically up to twice as much money that has been produced is in circulation, and a bank can lend out up to half the amount of money it holds~ At 20%, it's theoretically 5x as much money~ At 10%, there was theoretically 10x more money in circulation than has been produced~ Since 2020, the Federal Reserve (owned by banks) has set this to 0%. That means that banks could theoretically increase the money supply by an infinite amount (and are encouraged to in fact for the sake of giving people loans and reaping in the high interest rates) and can loan out an infinite amount of money they don't have~ While the government protects banks from suffering the negative consequences of their actions via bail-outs and deposit insurance, they don't stop the banks from effectively profiting off of other people's suffering via theoretically infinite loans and increasing the money supply (and inflation) to a theoretically infinite amount~ >_<
another thing the Federal Reserve can do is set the federal funds rate, or the interest rate at which banks can lend to other banks~ if a bank runs too low on money, other banks will want to lend them money to make interest for themselves (first and foremost) and secondarily, stop bank runs (which is where everyone wants to withdraw all their money from a bank before it runs out of money) that may lead to a loss in confidence in banks and potential regulations~ When banks take out loans from other banks to give out loans to consumers, the interest rate on the consumer's loan must always be higher than the federal funds rate, so they can make a profit~ When the federal funds rate is decreased, money is more fluid between banks, so it can readily lent out to consumers (causing inflation but also greater investment and economic development)~ When the federal funds rate is increased, it is more difficult to secure loans as banks have less money to lend (just like increasing the reserve requirement) and will need to increase the interest rates on consumer loans to gain profit themselves~ as such, loans may be instead taken from and in countries with lower federal funds rates~ currently, the federal funds rate is 3.5-3.75, so it's not a primary driver of inflation rn, altho it certainly was until 2022~
Wasn't that fun (especially reserve requirements~ >_<)? :D Welp! Anyways, now to the government itself! The government can regulate corporations in order to make a more free and fair market for other participants, especially those in disadvantaged positions like workers and consumers~ Specifically, anti-trust laws are supposed to reduce the power of large corporations and monopolies ("trusts")~
Companies and concerned citizens (altho almost always the former or the latter paid by the former) can do something called lobbying~ This means "talking" to various congressmen (Senators and Representatives) and bureaucrats (government employees) in order to tell them about an issue you have with the country, why it matters, and how the government can fix it~ ofc, this "talking" usually involves payments of money, campaign contributions including advertising, donations, job offers, etc. and is effectively legal corruption~ This is called the Iron Triangle.
Through the Iron Triangle, corporations can essentially break the law without consequences (notably, anti-trust laws) or change the laws on their own whims~ It's why the copyright for Mickey Mouse only expired in 2024~ Additionally, corporations may even get the government to pass regulations that ban competition (for example, foreign competition) or increase the barriers to entry for a market (basically securing the profits of those currently in that industry)~ all the bail-outs, tariffs, Cash for Clunkers, Obamacare, etc. were achieved through this same system~ pretty much all laws that are passed are passed to benefit those with power (corporations, banks, insurance companies, etc.) as a result of this~ Keep in mind that it's not the corporation paying for the lobbyists~ it's taxpayers~ it's consumers~ it's you~ :(
They tried to restrict corporate lobbying and campaign finance spending in the McCain–Feingold Act of 2002, but this got overturned by Citizens United v. FEC in 2010~ :( in the context of corporations, money is now considered to be "free speech", so it is illegal to restrict the spending of it related to government activities~ :( It should be noted that individuals are not given this type of "free speech", and even if they did, they couldn't do anything with it as we're too poor to matter~ :(
alright~ insurance companies~ They are pretty much evil to everyone~ if they find an error with your forms 3 years later, regardless of whether you're a corporation or a private individual, they can just take "their" money back~ >_< on the other hand, if you're a person or corporation, you can only do the same for 90 days, so you're screwed if they decide to check all your forms~ >_< in fact, car insurance companies have lobbied the government to force you to buy car insurance to drive (you know, practically exist in the US)~ D: anyways, as far as health insurance goes, it only got this bad due to the Affordable Care Act~ it was mostly passed the way it was due to the lobbying of both insurance companies and hospitals~ >_<
for example, health insurance companies now just get paid by the government for anything they "lose" on not extracting enough money~ >_<
additionally, it permitted hospitals to charge facility fees (usually 3x your bills) for emergency services to make up for "uncompensated medical care" even tho the Affordable Care Act pays for all the "uncompensated medical care" anyways~ >_< so basically, they get to take even more money from both you and the government~ >_< in response to this, the insurance companies basically swing a hammer at hospital bills due to them being way over-charged~ hence, why when you have insurance, you're basically hiring a thug to hold up a gun to a hospital and demand lower prices or they won't ever pay them again~ on the other hand, well, if you don't, the hospitals way over-charge poorer people without insurance to make up for the "lost" profits (actually just the actual cost of whatever it should be)~
