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Why is inflation so sticky? It could be corporate profits
111–120 of 324 posts
Re: Why is inflation so sticky? It could be corporate profits
#112Earlier quoted context omitted.
Why not both? The modern dismantling of antitrust regulation and enforcement is a significant driver of both. It's gotten way worse now than ever, to the point where private equity firms like Vanguard and Blackrock can be the biggest shareholders in direct duopoly competitors (KO and PEP are an example), or where investors and producers are permitted to fully horizontally and vertically integrate (AMZN is an example)…
You cited Amazon's vertical integration as a reason they need to be broken up, however Amazon retail's margins vary between 0 and 5%. Walmart on the other hand is more like 25%. Amazon is the best middle man that customers could ever want. They clip the ticket an almost imperceptible amount. The stores you'd probably promote, small mom and pop stores, generally have 50%+ margins. Who exactly is gouging customers? It'…
I feel we are entering seriously dangerous territory when someone is defending monopolistic practices because during the time of a monopoly consolidating itself the customers get a brief period of lowered prices that the monopolistic forces use to undercut all competitors.
Re: Why is inflation so sticky? It could be corporate profits
#113It's a sad fact but prices will always remain sticky on the way down. Then again so do wages, while inflation was small and consistent it oiled that machine to keep from there being a big drop in purchasing power. But when inflation is in the double digits that all breaks down. It's also a clear reminder of how so much European utopian aspects (free healthcare, education etc) is run on pure goodwill. Just look at the…
> It's also a clear reminder of how so much European utopian aspects (free healthcare, education etc) is run on pure goodwill. Just look at the strike action in the UK with Nurses having seen 15% pay cut (being forced to accept a 5% pay "rise" after much negotiation) and doctors have seen a 21-26% paycut. It's not run on pure goodwill, it's run on taxes. Taxing corporations has been against the zeitgeist of neolibera…
Why are you blaming UK's health crisis on neoliberalism? The NHS is as "socialist" as you could get in Western society.
Re: Why is inflation so sticky? It could be corporate profits
#114Earlier quoted context omitted.
Japan had the same monetary policy for the same period of time and saw zero inflation. It's not monetary policy. There's no reason to think that 15 years later some magical thing happened to flush all the pressure that had built up out of the pipes. It was due to a combination of fiscal stimulus, yes, to a degree - and also supply chain issues, a land war in Europe, shutdowns in China, and myriad other confounding fa…
Japan now has actual inflation and is going to be completely powerless to stop it.
That's a great theory. Let's see how it plays out. Looks like it's down to 3.2% from 4.3% at the start of the year. [1]
Re: Why is inflation so sticky? It could be corporate profits
#115Earlier quoted context omitted.
There's this strange thing that is done. We have economics departments and business schools and they aren't the same thing. Mainstream neoclassical economics is mostly preoccupied with what ought to happen in some mathematically defined fantasy world and business school is the study of what actually does happen. In fact when you get into post-graduate classical economics, it's mostly just a formal branch of mathemati…
I think marketing (and branding) is the antithesis of classical economics and the primary reason reality diverges from theory. Marketing is extremely effective (despite everyone saying they are immune) at de-commodifying commodity products and detaching demand from price (or at least minimizing price's importance) Take auto insurance... probably the biggest TV advertiser in the US. Highly regulated product, nothing t…
Marketing is part of the product design. The decisions on what to do and what not to do when coding or designing a feature should be a result of a marketing interrogation because you're building the product to be used in some set of ways by some set of people.
Once you stop thinking about what they actually care about, you're drifting away from a successful execution.
This is from copy to code. From price to presentation to features and flow.
It's not a nice to have or something that's tacked on, it is the soul of the product in the prospects mind - the driving force for the whole effort from the first keystroke to the last signoff from QA, your product lives or dies by your market models and theories and how focused your execution of them were.
Doing this right is the difference between Creative Zen, Apple iPod and Sandisk Sansa or FirefoxOS, Android and MeeGo.
Technical competency is a necessary ingredient but it doesn't get you there alone.
If you want to build something that doesn't bomb, you need to study marketing, significantly and heavily.
Re: Why is inflation so sticky? It could be corporate profits
#116Free 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…
>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.
If you can't find a narrative of how "human decisions" caused inflation in 2021-2022 you aren't trying very hard.
I'd say that believing that there was an exogenous shock to greed during the pandemic is much more animistic than these explanations.
Re: Why is inflation so sticky? It could be corporate profits
#117Their 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…
Things I pay a lot for: * Rent (they're all high; and can't afford to buy anywhere near where I work) * Food (prices are pretty much the same everywhere) * Internet (Cable's the only modern-speed option where I currently rent) * Energy / Gas - either utilities or again, the same everywhere I think most everyone else is in the same boat. I can scale down some of these a little bit, but they're all fairly __inelastic__…
You'll get more shortages and higher inflation with your solution.
Re: Why is inflation so sticky? It could be corporate profits
#118Earlier quoted context omitted.
Good Odd Lots episode goes into this theory. [1] Basically companies found that by raising prices, they were able to increase profits despite shipping fewer units - and they wanted to see how much they could do so. When Pepsi had to leave Russia, which accounted for 4% of revenue, they just increased the price in the rest of the world to compensate without issue. And seeing that, Coke followed suit. However at this p…
This story is not incompatible with a more-basic one where inflation debases the currency, so when a company starts exploring price hikes for whatever reason they unsurprisingly realize greater profits (since they were implicitly lowering the price by selling for the same quantity of a less-valuable currency). Imagine that Pepsi was selling for ETH in 2021, then "discovers" after the price of ETH halves in 2022 that…
Inflation is measured from a change in purchasing power, it's not a function of supply - because what you do with the supply is what matters, not that it exists. These companies raising prices would be inflationary in and of itself.
Supply may or may not yield inflationary pressure, but a change in supply is just that - a change in supply. Inflation is measured from a change in prices. For instance, a 100% sales tax would be massively inflationary (at least initially) and wouldn't be reflected in supply of currency units.
ETH like BTC prices are just high-beta derivatives of US dollar liquidity in the global financial system. And that's pretty generous, assuming it's not just a rigged mob casino run by a small handful of insiders. It's not really comparable because it's not really a currency. In the sense that nothing is actually priced in ETH or BTC - it's an open loop system. Everything's priced in dollars and converted at the last second to a BTC/ETH price, and then those are usually immediately sold for dollars to pay suppliers, etc. There's at best a negligible closed loop BTC/ETH economy.
Re: Why is inflation so sticky? It could be corporate profits
#119Earlier quoted context omitted.
I largely agree. People generally miss fundamentals and don't account for a moving store of value, they often assume its constant. Economics is marginally only used to sell something often with deceit in mind on someones part. As for what's driving inflation, its obvious its the fact that government is spending more than they have each year, printing the difference, and have now gone gangbusters with manufacturing sp…
You are attributing a lot of agency to different players. They generally aren't that monolithic. You seem to be conflating shortage and scarcity, which generally aren't the same. It's an interesting theory but I'd like to see some evidence. For instance, the general consensus is the supply chain issue is from Lean manufacturing which, although has a lower overall cost, trades that off with a much lower tolerance for…
I'm always on the hunt for more articles to read.
Scarcity is just a given in a scarce world. The perception of shortages on the other hand acts similar to static versus dynamic friction. Once things get moving they become less sticky.
Most of the issues originate in one industry, that says it doesn't pick winners and losers, but consistently does at the tax-payer's expense. They also have a very sordid history as a private institution and to date have never met their chartered mandate. I've read a lot about the history of the Fed.
The supply chain issues rely on cheap labor and cheap transportation that were optimized in many respects for single points of failure due to cost savings. If your an authoritarian regime you usually have both. I've worked as a System's Engineer, and we always look for these in any system for improved resilience in the design.
The lack of silicon processing is a special case, and underlies the complexity of manufacturer; the same issue affected both electronics and automobile shortages. The methods of manufacturing are much more specialized and fault intolerant in the former (because only 1 company supplies the dependencies, ASML) than the latter (paper).
Re: Why is inflation so sticky? It could be corporate profits
#120Earlier quoted context omitted.
Things I pay a lot for: * Rent (they're all high; and can't afford to buy anywhere near where I work) * Food (prices are pretty much the same everywhere) * Internet (Cable's the only modern-speed option where I currently rent) * Energy / Gas - either utilities or again, the same everywhere I think most everyone else is in the same boat. I can scale down some of these a little bit, but they're all fairly __inelastic__…
You'll get more shortages and higher inflation with your solution.
Unless you tax land. Nobody manufactures that for profit but profit handsomely from it they do.