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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

#211
post #109

Earlier quoted context omitted.

> 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.

[deleted]

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

#212
post #97

Earlier 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__…

Notice how many of those things have highly inelastic supply, are monopolies (or close), or have really bloated "value adding" supply chains. NIMBYs and such ensure that more housing can't be built, at scale , in areas with high rents, to have normal supply/demand dynamic. Food is relatively cheap, if you cook for yourself and don't mind a lot of beans, rice, bread-machine bread, peanut butter, etc. If you want heavi…

Prepared food is really unconsolidated like bulk food unless you live in a total roadside mall hellscape. There seems to be agreements on maintaining irrational pricing where there is price differentiation. I.e. you will pay more for cheaper to make vegan food because a vegan can't eat a cheap burger. IMO this is more distributed in nature like landlords sharing a price fixing app.

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

#213
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…

> and no company wants to get an edge over its competitors by undercutting on price despite having record margins?

They have record profits, why disrupt a winning formula?

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

#214
post #193
post #160

Earlier quoted context omitted.

>The idea that you can tax an input more and reduce prices is ridiculous on its face. Of course. It would absolutely reduce the price of property. Just not rents. >Basically any change in local conditions will impact housing demand Hand waving. >Property tax already does that, and most places have properry taxes. When high enough property taxes do inhibit hoarding, yeah. They approximate a less desirable form of land…

So if I buy the reduced price property, would I not afford to offer cheaper rent and still get the same return on investment?

No, because you would still need to pay your land value tax.

The lower mortgage payments on the cheaper property would be offset by higher tax payments.

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

#215

Earlier quoted context omitted.

the rent, as always: https://en.wikipedia.org/wiki/Law_of_rent and the companies do not want to compete: most modern large companies only exist as a _vehicle for investment_, and as such compete for shareholders, not consumers. Due to this, short-termism dominates: average CEO stays 4 years at a given company, and performance of the company after they leave is largely uncorrelated with their carreer success, while sh…

The problem with your (and many others) "short-term thinking" argument is that the assumed long-term consequences -- you wrote "crash everything" -- doesn't happen. We went from 2008 to now, 15 years, with corporate profits and stock prices zooming straight up. Even shutting down the globe was just a temporary blip. Highly aggressive corporate activity, massive expansion of economic inequality, yet the longest non-re…

> the assumed long-term consequences [...] doesn't happen.

It's not the fall that kills you, it's the sudden stop at the end. I would hesitate before saying anything categorical.

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

#216
post #183

Earlier quoted context omitted.

They don't even need to "collude". They can just look at what their "competitors" are doing. I raise my prices a little bit. You see me raise the prices a little, and you raise them a little. And then I see that and raise them a little more. Then I do a tiny round of layoffs. You also layoff some people. Then I do a bigger round of layoffs and communicate big profits publicly. And you follow suit. You and I never tal…

Yeah exactly. What we're looking at here are similar actors reacting to the same incentives. Pepsi raised prices because they can and their shareholders demanded it. Coke raised prices because they can and their shareholders demanded it. Thus 80% (or whatever) of soda worldwide increased in price, without collusion. So you have the failure case of collusion without the cause, which sucks because we didn't really cons…

Corporations were always maximally greedy, but there were times where the markets were not 200% saturated and new demand did not had to be created artificially by mass indoctrination.

I mean, everybody who have seen their neighbor's electric / gas stove wanted one for themselves very quickly to avoid the need to lug wood. And when radio and TV came? Don't even get me started. Fridge, washing machine, dishwasher, vacuum cleaner, camera, car, phone, portable music player, PC, laptop, cell phone...

It all sells / sold really easily just by word of mouth and you just needed to run slightly faster than competitors to capture higher portion of the market. So the incentives were mostly aligned and capitalism delivered value (in those areas).

Now there is no easy way to create a good or service that will instantly save multiple hours per week for almost everybody. No easy way to make luxuries of past like having oneself painted or being served a meal (women must have loved that) available to masses. But still, some that provide meager improvements managed to take off. Robotic vacuums, food (and grocery) delivery services come to mind.

Hence the rush to convert the market shares into an enduring rent.

Eventually corporate landlords will realize that they have the ultimate power and just tax everyone so high that only the basic subsistence is possible, with zero luxury. Maybe then the public will finally reconsider the arrangement.

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

#217
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…

> 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 record margins? Covid has nothing to do with it. Market always worked this way. There's really very little reason for a company to lower the prices below what consumers are already willing to pay. When the market is saturated and…

If the market always worked this way, why is it being blamed for inflation that has only existed for the past year?

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

#218

No shit, Sherlock: In Portugal, for most of 2022 to this day, the price of 1L own/white brand of semi-skimmed milk (one of the most basic and essential staple foods) has been the exact same - to the cent - on all different supermarket chains (Lidl, Audi, Auchan, Jerónimo Martins, Intermarché, Sonae, Dia, etc.) operating here. And, it has risen in steady small increments at exactly the same time in all of them, multip…

I'm not saying there is no price fixing, but this could also be explained by the supermarket chains all using the same suppliers (which is most definitely the case since the dairy market is not as diversivied as one might think; it's dominated by a few big players) and those suppliers already doing cut-throat price competition with razor sharp margins, meaning that if the slightest cost increase happens then it impacts all of them and once one can't take it anymore and raises by a few decimal percentage points, everybody else will immediately do that to.

Ever been to a gas station? That raised the price multiple times a day just like the other gas stations a few hundred yards away? Same principle. Doesn't need price fixing as explanation. They are just all buying the same raw product.

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

#219

Earlier quoted context omitted.

This only works in an environment that's flush with cash. E.g. a decade long bull market with artificially low interest rates, 2018 tax cuts, and stimulus from covid. Was a perfect storm.

It works fine as long as the money you lose from the people you price out amounts to less than the money you gain by overcharging others who can afford it. You don't need an environment flush with cash for that to happen, you just need enough people who are well off enough to pay, or (as we saw in the pandemic) desperate enough to go into debit in order to get what they want. There's likely a rather large segment of…

Exactly, and this is why wealth inequality is the biggest social-economic problem we have right now, leading to the rise of the far-right (interestingly, the far left seems quiet compared to the early 20th century - I suppose the 'defeat of communism' is fresher in everyone's minds than the defeat of fascism).

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

#220

Earlier quoted context omitted.

the rent, as always: https://en.wikipedia.org/wiki/Law_of_rent and the companies do not want to compete: most modern large companies only exist as a _vehicle for investment_, and as such compete for shareholders, not consumers. Due to this, short-termism dominates: average CEO stays 4 years at a given company, and performance of the company after they leave is largely uncorrelated with their carreer success, while sh…

I'm not familiar with the law of rent, but it does not seem accurate. Right now blue collar workers can't afford to rent within a 60 minute commute to Boston, where they are not paid a wage that justifies that commute. Why would you cook or clean in Boston when you could do it literally anywhere else in MA without the commute? I guess my point is that markets continually prove to not be rational. Maybe a philosopher…

> Why would you cook or clean in Boston when you could do it literally anywhere else in MA without the commute?

Because that's where you have your social connections. Friends, family. That's where your home is, your parents lived there, your grandparents lived there, you grew up there. And you hold out for better times. And that's why you can be exploited like that.

That's the "not rational" part. The humans participating in the market are not "rational", for some odd definition of the word. But if you think through motivations, they are rational, if you put value in the reasons why people do this kind of job in this kind of situation.

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