Eurodollar University Why Prices Never Come Back Down... Ever
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Feb 1, 2026 A clear breakdown of why consumer prices that rose after the pandemic cannot legally return to prior levels. A simple firm-level example shows how cost shocks squeeze profits and purchasing power. The conversation explores consequences for hiring, wages, underemployment and why disinflation is not the same as price rollback. Historical supply-shock cases are used to frame today's economy.
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Simple Firm Example Shows Folded Profits
- Jeff Snider uses a simple firm example: pre-shock costs $10 each for labor, materials, and utilities with $10 profit on a $40 price.
- After a 50% input shock costs rise to $45 and the firm may only charge $50, cutting profit to $5 despite higher prices.
Disinflation Is Not Price Reversal
- Disinflation means the rate of price increases slows, not that price levels fall back to previous values.
- Jeff Snider calls the shift a phase change: prices move to a higher plane and stay there.
Focus Policy On Income Adjustments
- Expect incomes to need to rise to match higher price levels if households are to maintain purchasing power.
- Jeff Snider implies policy and labor market focus should be on raising incomes rather than forcing price reversals.