We missed a few amusing stories while we were out but one of the most amusing and also notable was the fact that inflation wasn't and isn't cereal guy's fault.

Cereal guy was the CEO of WK Kellog's, Gary Pilnick. He got in hot water (ha) when he talked up his company's strong quarter and, among other highlights, revealed why his company has been able to sell so many more boxes of Rice Krispies and Mini Wheats and Raisin Bran.

More specifically, he mentioned that in consumer surveys they are seeing more and more consumers have cereal for dinner, which he was understandably but somewhat grossly very pleased about.

The media termed them a "let them eat flakes" moment and while it was tone deaf, the CEO of Frosted Flakes wasn't encouraging consumers to do so, just stating that they were and he expected it to continue.

Here is the actual quote:

“Cereal for dinner is something that is probably more on trend now, and we would expect to continue as that consumer is under pressure."

You can see it here:

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It is always a bad omen for a company's public relations team when a journalist is both incredulous and excited about what their executive is saying on TV.

The uncomfortable implication, which Mr Pilnick didn't even bother to deny or pretend is regrettable, is that people who are struggling to make ends meet are turning to cereal for dinner. This makes sense because despite higher prices for breakfast cereal as well, turning to the cheap and filling food for their dinner is one method of making food stretch.

This is obviously very sad. It was also ghoulishly amusing and interesting in a way that a somewhat out of touch CEO saying the quiet part out loud is always illuminating.

But we also found this whole episode pretty striking and also worrying about the larger context.

Let us go in turn:

It was striking because it so clearly underlined the very real cost of inflation. We still remember with considerable shock the mainstream press articles that, once high inflation was well and truly established, arguing that actually when you really study the issue, inflation was a good thing.​

The above is our favorite but there are plenty more. See here, h​ere and here.

We were outraged by that claim here at Pebble HQ because it seemed both disingenuous and also hugely irresponsible. The evidence is crystal clear: the cost of elevated inflation falls disproportionately on those with low and fixed income. Furthermore, the cost is very high and the impact is very serious. It leads to exactly the type of scenario that Mr Pilnick describes.

That is a shame.

It also isn't the company's fault. It might feel good to blame corporations for "greed" and higher prices but Mr Pilnick is in charge of making Rice Krispies and Mini Wheats after all. That is an important job no doubt and he no doubt has some pricing power in his supply chain but he has precisely zero control over monetary and fiscal policy or, even more fundamentally, the direction of the global economy.

He is just cereal guy, at the end of the day.

This brings us to what was so worrying about this whole drama.

Mr Pilnick may be both impressively tone deaf and/or crazily outspoken, it can be hard to know which, but he isn't at fault, morally or otherwise. Furthermore, the fact that people can't afford dinner is actually somewhat important to discuss out loud and in depth.

Why?

Because it underlines exactly why inflation is so scary and not just from the "poorer people get hammered" perspective.

It also demonstrates that we haven't really learned our lesson from 2020-2022 on. That lesson was very, very important and based on the brouhaha around Mr Pilnick we are missing the obvious conclusion.

Elevated and volatile (both aspects are very important) inflation didn't happen because a cabal of greedy executives got together and decided to rip off regular people. Rather it happened because during a time of supply disruption the US government - in era that bridges both parties - spent nearly 25% of GDP in fiscal stimulus in under 2 years.

That spending obviously stoked an incredible amount of demand at precisely the time when it was difficult for the global economy to meet it with enough supply.

This unmet demand led to price rises that were then exacerbated and accelerated by a central bank that, in parallel, kept interest rates exceptionally low while also stimulating the economy through a huge and sustained program of quantitative easing.

As the earlier analysis indicated, we are still living with the bizarre consequences of those policy choices. They are not harmless or "over" in any meaningful sense of the word.

It is a more complicated than the above and no doubt academics and policymakers will be arguing over the precise origins and important drivers for the rest of this century. However, the broad strokes are there and regardless of the precise breakdown Mr Pilnick and Kellog's does not feature whatsoever.

The lack of accountability for politicians and policymakers isn't probably a surprise - it is what they do after all - but it is very concerning. The issue is that if we obfuscate or, worse, willfully scapegoat the likes of Mr Pilnick then we risk falling back into the very trap we have just spent a hard year digging ourselves out of.

This doesn't mean that inflation will necessarily come roaring back but it does suggest that we have not learned our lesson about who and more importantly what was responsible for its rise in the first place.

This gives us pause. For one thing we are in an election year and both (nearly certain) major candidates have a proven track record of fiscal profligacy. It also isn't clear that either of them have either learned the lesson or acknowledge the fact that a lot of Americans are eating cereal for dinner.

It is tricky since, of course, they are arguably both responsible.

For another, one the scariest aspects of the inflation in 2021 and 2022 was that a lot of economics elite commentariat went missing when it came to calling out the dangers of the additional spending proposed and then passed in the spring of 2021.

There were some notable (and Democratic) exceptions like Larry Summers and others like Jason Furman who have come out and publicly discussed both their regrets and, more importantly still, the fact that they felt pressure in their political heart not to say what their economics brain knew was possible.

That episode of conspicuous silence led directly, in part, to the launch of this newsletter because it was pretty worrying to witness a lot of people who should know better did nothing because of political tribal allegiances (or political groupthink).

Thus, this makes us very nervous. Right now, before the election, the US is still politicized, deeply polarized and our politicians and senior policymakers are still unaccountable and our elites commentators are blaming the likes of Mr Pilnick when they should be instead

That recipe adds up to a very uncomfortable possibility.

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