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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

#221

Post by mrep »

simiansays wrote: post #38
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.

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)…

> The largest US company in 1929 had revenues of about $1.5bn - roughly $30bn in 2023 dollars, which wouldn't even put it in the Fortune 100 today. Walmart today has revenues of about $600bn, which is roughly equivalent to 6x the top 50 companies in the US in 1929 combined!

US real gdp is 10x what is was in 1947 [0] (FRED only goes back to 1947). Add in the extra 18 years and the fact a bunch of companies are now global thus expanding their markets and those revenue numbers don't look so surprising.

Also, why'd you pick the start of the great depression as your start date?

[0]: https://fred.stlouisfed.org/series/GDPC1

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

#222

Post by jongjong »

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…

That sounds about right... But if we want to get to the root cause, we'd have to look at the design of the monetary system and the last decade of monetary policy.

Never in history have there been so many market oligopolies; and it coincided with a transition to a global soft money standard as global fiat currencies became increasingly more decoupled from gold.

Before, a dollar could be exchanged for a certain fixed amount of gold; this had clear and objective economic value. Nowadays, money is decoupled from any hard/objective economic value.

Today, banks issue credit proportionally to asset prices which are themselves determined by how much new credit enters the system... A vicious cycle which forces banks to keep loading new generations with more credit at a steadily increasing pace to avoid bursting bubbles.

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

#223

Post by RugnirViking »

kristopolous wrote: post #115
listenallyall wrote: post #42

Earlier quoted context omitted.

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 presenta…

while that may be, i'm not sure how it relates to what the previous commenter was saying.

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

#224

Post by willis936 »

greenfield1 wrote: post #220
willis936 wrote: post #156

Earlier quoted context omitted.

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 particip…

No the "not rational" part is that wages are not commensurate with cost of living increase because short term thinking yielding record profit margins is addictive.

Workers are leaving because they can't afford it, not because they want to stratify their families and leave their homes.

For those thinking this is the market successfully working: has the market successfully worked in the Bay Area? How does SF look right now?

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

#225

Post by StingyJelly »

Already__Taken wrote: post #163
politelemon wrote: post #99

In the UK there's a company called Virgin Media (broadband, TV, phone provider) which has been completely blatant about it. They recently informed all customers that going forward they will annually be increasing prices by RPI + 3.9%. https://www.virginmedia.com/mobile/annual-rpi-price-increase https://www.ispreview.co.uk/index.php/2023/01/virgin-mobile-...

and ee took CPI 10% + 3.5% profit. I don't know how that's legal when you look at how the CPI is calculated and it included these companies already. They're adding onto their own adjusted price inflation.

The effect an individual company would have on CPI is negligible. Besides, CPI strongly underestimates the actual devaluation of currency. You can look up local newspaper prices from 10 years ago and today and compare that to newspapers index that goes into the CPI calculation and I'm almost sure the price difference would be significantly larger compared to that skewed statistic.

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

#226

Post by willcipriano »

HPsquared wrote: post #179
willis936 wrote: post #156

Earlier quoted context omitted.

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…

In the case of the Boston cleaner, that seems to indicate the living costs can also drive salary. If nobody applies to work somewhere, the wages either go up or the job goes unfilled.

When then starts happening the politicians start screaming about how we need more immigrants (who are willing to live 5 to a 1 bedroom apartment and suffer a brutal commute).

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

#227

Post by RugnirViking »

politelemon wrote: post #99

In the UK there's a company called Virgin Media (broadband, TV, phone provider) which has been completely blatant about it. They recently informed all customers that going forward they will annually be increasing prices by RPI + 3.9%. https://www.virginmedia.com/mobile/annual-rpi-price-increase https://www.ispreview.co.uk/index.php/2023/01/virgin-mobile-...

thats unbelievable. Diabolical.

That is the path to hyperinflation if more companies adopted something similar.

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

#228

Post by RhodesianHunter »

listenallyall wrote: post #168
shoubidouwah wrote: post #136

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…

And yet wages remain flat while profits and inflation rise.

The average person in this country already can't afford on two incomes what the last generation could afford on one.

How sustainable is this?

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

#229

Post by DrNosferatu »

greenfield1 wrote: post #218
DrNosferatu wrote: post #198

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 impac…

This is nation-wide to some 10 million customers.

For your alternative explanation to be true, it would require that all the 8 retail chains would have the exact same margin by natural, fair chance - and, cumulatively by fair chance, increment prices by exactly the same amount, at exactly the same time...

Better play the lottery.

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

#230

Post by DrNosferatu »

DrNosferatu wrote: post #207
DrNosferatu wrote: post #198

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…

Right on the money: https://youtu.be/Bo2BxTcVp74 Mark Blyth is definitely one of the most clear-sighted economists of today.

Really?

Why did someone downvote this very elucidative video?

Update: My posts on this thread are getting downvoted a lot, and I'm just stating facts! It seems I'm hitting a nerve... :D

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