Why is inflation so sticky? It could be corporate profits

Post by HPsquared » Wed, May 03, 2023, 10:23 AM UTC

bell-cot wrote: post #172

windex wrote: post #147

Earlier quoted context omitted.

All of them were sorted during WFH. I moved out to remote places and paid far less. I saved quite a bit on all of the above remote other than Internet of course. The economy is setup to extract your money from you once you've earned it.

> The economy is setup to extract your money... Well, yes. How else can the rich keep getting richer? And the umpteen million individuals assuming "stocks will return 10% over the long term" in their retirement planning actually manage to retire as they planned? And as long as the culture wars can be kept burning fairly hot, the line-ups of new movies and video drama compelling, and the web addictive - the poor worki…

Post by otikik » Wed, May 03, 2023, 10:23 AM UTC

tiedieconderoga wrote: post #13

silisili wrote: post #9

Earlier quoted context omitted.

Perhaps you went to a better school than I did. I only did 101 and 102, but even then the professor always spoke in terms like we were some old village, probably to make things easier to understand. But obviously those analogies don't apply to the world today, mostly.

The problem is that people aren't rational, and they don't have perfect information. So the history of finance and commerce has been a cat-and-mouse game where the cats find new ways to cheat people, and the mice try to recognize and prevent those schemes. One example: cartels. If an industry is dominated by a small number of large players, they can collude to set prices and stifle competition through regulatory capt…

Post by rossriley » Wed, May 03, 2023, 10:31 AM UTC

mitthrowaway2 wrote: post #88

rossriley wrote: post #82

Earlier quoted context omitted.

Don't forget supply and demand works on the capital side of the equation too, higher inflation means shareholders push for higher profits in the same way that high inflation causes workers to push for higher wages. There's increasing supply of investments at higher rate of return, bond yields are close to 4% which means riskier investments need to pay more to compete.

Absolutely. But for competitors to raise margins bilaterally requires cooperation, because each side can take market share by keeping prices low. I just wonder if the cooperation might come in the form of, say, one powerful shareholder of both competitors making calls to the boards of directors of both competing companies. Unexpected consequence of passive investing?

Post by spaceman_2020 » Wed, May 03, 2023, 10:36 AM UTC

mjevans wrote: post #97

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…

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__…

Post by spaceman_2020 » Wed, May 03, 2023, 10:37 AM UTC

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.