The Muamalat Newsletter Vol.1 2023

43 FEM Newsletter | June 2023 lenders, and buyers and sellers. The increasing uncertainty discourages saving and investment. Not only can high inflation erode the economy from growth, but it also makes the poor worse off and widens the gap between the rich and the poor. If much of the inflation comes from the increase in food prices, it hurts the poor more since over half of the family budget of the low- wage earners is spent on food. Second, it redistributes income from fixed-income earners (eg. pensioners) to owners of assets and earners of large and variable income, such as profits. Why Staples Food at Grocery Store are Expensive? An article in Time Magazine explains why staple food namely chicken and eggs, butter and margarine, meat and vegetables, and fresh fruits One example is the rising beef prices in the United States, where the four meat packers, an oligopoly industry, were accused of ‘pandemic profiteering because they control almost 75% of the production of beef products. Another major disruption is the supply chain disruption. Shipping backlogs at major ports due to many truck drivers quitting their jobs and factories cutting down their production during the pandemic. The labor shortages created an inflationary situation as well as the need to attract workers with high wages and supply chain disruption contributed to the global rising prices. When inflation crosses reasonable limits, it has negative effects. It reduces the value of money, resulting in uncertainty of the value of gains and losses of borrowers, are expensive at the grocery store as shown in Figure 1. Even though the article is explaining the situation in the US, there are lessons to be learned For chicken and eggs, the increase in prices is due to the ongoing avian bird flu epidemic outbreak in the US. Others believe that the high cost of eggs is due to price gouging. As for butter and margarine, extreme heat and smaller cow herds due to the result of pandemic financial struggles, are the main reasons behind the price increase for butter. Additional factors are higher energy and fertilizer costs. In the case of margarine, the Ukraine-Russia war disrupted the supply chain of the main ingredients in the production of margarine such as sunflower oils and soybean. Looking at meat, the Figure 1: Comparing Prices of Staple Food in 2021 and 2022