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Why is inflation so sticky? It could be corporate profits

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Re: Why is inflation so sticky? It could be corporate profits

#71

Post by 2000UltraDeluxe »

refurb wrote: post #36
wg0 wrote: post #23

Basic issue isn't excess of money. Basic issue is shortage in supply. Demand hasn't skyrocketed magically. The world over production levels were lowered to almost zero for couple of years. Interest rate hikes have wreaked a havoc of their own.

Why would a supply chain issue in a handful of products cause the price of all items to go up? That makes no sense.

Handful of products? In Finland, at least, much of the grocery market is controlled by two dominant players that more or less control the entire supply chain for many products. Both have been profiteering like crazy lately, and for most people there's no option than their local supermarket.

Re: Why is inflation so sticky? It could be corporate profits

#72

Post by bugglebeetle »

paxys wrote: post #58

Their argument is basically that while normally a company raising prices would mean that some of their customers move to a competitor, in today's environment there is an implicit agreement that every company will keep prices high. So are they saying that the free market is basically not a thing anymore because of covid, and no company wants to get an edge over its competitors by undercutting on price despite having r…

No, it’s the result of the massive shift in antitrust regulation from the Reagan era on, where US largely abandoned anti-monopoly enforcement, resulting in corporate concentration and collusion. The free market is “not a thing” because of a lack of real competition.

Re: Why is inflation so sticky? It could be corporate profits

#73

Post by bugglebeetle »

Paul-Craft wrote: post #7

Why is this a good explanation now, when 6 months ago it was being pooh-poohed? Take a look at the graphs in this article: https://www.politifact.com/article/2022/dec/10/what-do-high-... The graphs lay out a clear picture of rising corporate profit margins, meanwhile the text is saying to "Ignore the man behind the curtain." What's different today that the WSJ can run this piece today?

The Fed started blowing up banks in its attempt to crush worker wages because when you kill a 1,000,000 plus people, disable countless more, force a bunch of early retirements etc you have to jack up rates super high, super fast to overcome wage increases from the resulting labor shortage. People who read the WSJ work at and invest in banks and don’t like to lose their shirts. So, they’re conceding to a little internecine war among the ownership class in the hope that the financiers can squelch the corporate price fixers before the banking system implodes.

Re: Why is inflation so sticky? It could be corporate profits

#74

Post by RandomLensman »

silisili wrote: post #3

It's a likely theory. But economics teaches us when a player overcharges, others will step in to undercut and take all the market share. So, we're at a point where we need to admit that mantra isn't true in the modern age, or admit that we've done a terrible job at preventing effective monopolies/duopolies from forming.

These days it is about exploiting willingness to pay, so (some) companies tend to model how much they can charge or how to charge more (incl. by increasing consumer surplus). Overcharging is less likely in such a setting.

Re: Why is inflation so sticky? It could be corporate profits

#75

Post by seu »

Free market economists are followers of a cult full of animistic creatures, like the "Free Market" and "Inflation", which have their own volition and just choose to "stick around" or "fairly distribute goods", without the need for absolutely no human to many any decision at all.

"This damned inflation is so sticky!" I imagine one of them complaining, while trying to wash it off their hands. "Yeah, if only Free Market could solve it," says the other, while praying the Corporate Profits to raise even more.

Re: Why is inflation so sticky? It could be corporate profits

#76

Post by yipbub »

IIRC, this seems to imply companies are colluding. Does it even matter if it's tacit or explicit collusion? - Explicit collusion is hard to detect. Someone with interests (an exec with giant options and incentives), meets an Exec from another at dinner. They have a conversation. Who knows? - Implicit/Tacit collusion is easy. The execs know that they can defect (lower prices) as soon as they see the other party defect. Why would a potential competitor ever think arbitrary prices that could sink at any point would be a competitive advantage worth investing in?

Re: Why is inflation so sticky? It could be corporate profits

#77

Post by [deleted] »

refurb wrote: post #36
wg0 wrote: post #23

Basic issue isn't excess of money. Basic issue is shortage in supply. Demand hasn't skyrocketed magically. The world over production levels were lowered to almost zero for couple of years. Interest rate hikes have wreaked a havoc of their own.

Why would a supply chain issue in a handful of products cause the price of all items to go up? That makes no sense.

[deleted]

Re: Why is inflation so sticky? It could be corporate profits

#78

Post by ohjfjfk »

silisili wrote: post #3

It's a likely theory. But economics teaches us when a player overcharges, others will step in to undercut and take all the market share. So, we're at a point where we need to admit that mantra isn't true in the modern age, or admit that we've done a terrible job at preventing effective monopolies/duopolies from forming.

With what capital will someone step up and undercut the minority that have monopoly control of capital?

At this point it’s a network of too few who collude out of view.

Re: Why is inflation so sticky? It could be corporate profits

#79

Post by nervlord »

bugglebeetle wrote: post #73
Paul-Craft wrote: post #7

Why is this a good explanation now, when 6 months ago it was being pooh-poohed? Take a look at the graphs in this article: https://www.politifact.com/article/2022/dec/10/what-do-high-... The graphs lay out a clear picture of rising corporate profit margins, meanwhile the text is saying to "Ignore the man behind the curtain." What's different today that the WSJ can run this piece today?

The Fed started blowing up banks in its attempt to crush worker wages because when you kill a 1,000,000 plus people, disable countless more, force a bunch of early retirements etc you have to jack up rates super high, super fast to overcome wage increases from the resulting labor shortage. People who read the WSJ work at and invest in banks and don’t like to lose their shirts. So, they’re conceding to a little intern…

[dead]

Re: Why is inflation so sticky? It could be corporate profits

#80

Post by solatic »

Where goods and services are not commodified, people are unwilling to pay switching costs ("so much is uncertain, why increase uncertainty when I don't need to?"), so long as price differences are not "too large". This implicitly puts a floor on prices as producers hold onto their customer bases and slowly raise prices on newcomers.

Where goods and services are commodified, the commodities have largely (at least in the US) been captured by oligopolies that implicitly understand that they should keep prices high, no direct collusion required. New entrants to the commodified markets (who would produce the commodities at lower prices) are nowhere to be found, as markets are highly regulated with high barriers to entry.

Break up the oligopolies and encourage entrepreneurship.

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