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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

#251

Post by mardifoufs »

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…

Weird because Portugal has had a higher inflation rate than the US in 2022 (8.1% vs 6.5%). The same is likely going to be true for 2023 according to projections and current data

https://economy-finance.ec.europa.eu/economic-surveillance-e...

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

#252

Post by bugglebeetle »

robocat wrote: post #128
bugglebeetle wrote: post #73

Earlier quoted context omitted.

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…

> when you kill a 1,000,000 plus people > resulting labor shortage Alternatively when you kill a bunch of mostly retired and sick people, perhaps you increase unemployment (nurses and rest home workers freed up) and decrease spending (dead people don’t buy services or goods). Besides, the total number affected is a very low percent of the population, which is less significant than other economic changes over the prev…

Okay, but its what the guy jacking up the rates said about the labor shortage himself, so…

https://www.axios.com/2022/12/01/jay-powell-explains-america...

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

#253

Post by danaris »

biscottigelato wrote: post #157

Tesla cutting prices aggressively at the expense of both their own margins, but also of other automakers having their market share and revenue shrinking massively, puts this WSJ theory immediately to bed.

"Sure, companies across many industries are raising prices despite record profits—but because this one company, which is known to be a bit of an outlier, with a CEO who has been demonstrating sharply increasing erratic behavior, is cutting prices, the whole idea is bullshit!"

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

#254

Post by dragonwriter »

JoeJonathan wrote: post #146
dragonwriter wrote: post #135

Earlier quoted context omitted.

> Not if you tax low use more heavily than higher density uses and encourage building more housing supply. If you tax land with higher taxes for lower density, then, yes, you’ll radically increase food costs.

If only there were some way to distinguish farms from not-farms…

Ye, taxing by kind of use would be a different thinf than proposed.

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

#255

Post by dragonwriter »

pydry wrote: post #171
dragonwriter wrote: post #135

Earlier quoted context omitted.

> Not if you tax low use more heavily than higher density uses and encourage building more housing supply. If you tax land with higher taxes for lower density, then, yes, you’ll radically increase food costs.

A land value tax wouldnt tax density it would just tax the value of the land. This would encourage property density in high value locations like inner cities but wouldn't enforce it. In terms of farmland it would just mean that farmers rent the land from the government rather than, say, blackrock or bill gates (two of the biggest owners of farmland right now). This would not affect food prices by much it would just m…

> A land value tax wouldnt tax density it would just tax the value of the land.

I wasn’t responding to an LVT suggestion, but a suggestion of taxes that would be based on density of use and go up for lower density. I quoted the suggestion in my response. LVT is a whole different thing.

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

#256

Post by 2000UltraDeluxe »

refurb wrote: post #241
2000UltraDeluxe wrote: post #191

Earlier quoted context omitted.

It's not about disruptions in the supply chain, but rather about controlling it and using it to extract maximum value for the shareholders. Everyone wants their share and nobody will accept a smaller percentage than they did last week. Consumers are caught in the middle, with rapidly increasing costs of living as a result. We as in "society"), have assumed this would be solved by some healthy competition. It's just t…

So wait, inflation isn't due to supply chain issues, but due to "extracting maximum value"? So why was inflation only a problem last year? Did shareholders not try and extract maximum value before that?

More pressure to keep profits high due ongoing financial shenanigans. Add consumers with little to no options, and the expectation that the common good is more important than profits.

It turned out profits were more important, and now people are angry about the new 230g mayonaise tube costing the same as the 275g one did last year. But at least the new tube required 17% less plastic.

Something's got to give if we expect inflation to drop. _Many_ people expect businesses to take the hit. After all, many raised prices due to things like energy costs last winter, but very few lower them again now that production costs go down again.

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

#257

Post by sobkas »

yanderekko wrote: post #132
NLPaep wrote: post #125

Earlier quoted context omitted.

> The DOJ, explained forbes.com, charged that company “executives worked together to keep prices paid to poultry farmers low while raising costs for consumers at grocery stores and restaurant chains.” https://www.producer.com/opinion/u-s-government-strikes-out-...

Seems relevant to note that these charges failed..

> Seems relevant to note that these charges failed..

As USA lives in post law age it only means that relevant corporations carpet bombed regulator with lawyers, paid politicians, lobbyists, job offers for key bureaucrats(after they retire/leave) to make it go away. And to prosecute corporation regulator needs money, money they have is finite so they need to choose their fights. And they need don't know if around the corner some corporation doesn't produce fentanyl out of baby skulls. On top of that fixing plight of chicken producers won't translate into them spending money on lobbyists, hiring retired bureaucrats or financing PACs, everything corporations that gain from it will definitely do.

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

#258

Post by toss1 »

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…

>>the free market is basically not a thing anymore

I'd say this has little to do with COVID (beyond that it is a random event that decreased then re-increased demand), but the accumulated effect of decades of failing to enforce anti-trust law.

The most propserous times and bigges middle class ended with the Reagan administration, who in 1983, ordered the DOJ, FTC, and SEC to stop enforcing anti-trust laws dating back to the Sherman Act of 1890[0].

This massively destroyed small businesses and concentrated corporate power. E.g., the closer a store was to the Walmart location, the greater the likelihood it would close. Persky and his colleagues found that for every mile closer to the Walmart, 6 percent more stores closed. Close in around the store's location, between 35 and 60 percent of stores closed. [1]

Previously, anti-trust laws were enforced so aggressively that when Buster Brown and Kinney shoe companies wanted to merge in the 1960s the Supreme Court blocked the merger because the combined company would control about 5 percent of the US shoe market. Nike alone today controls around 20 percent of that market.[0]

Obviously, when anti-trust laws stop being enforced and massive corporations gain oligarchic market and pricing power, they can create inflation at will.

This power needs to be rebalanced.

Again, recognize, that the "free market" is ab absolute fiction — there is no such thing. Every market has rules and regulations, explicit and/or tacit. The only question is what are the regulations and who enforces them.

Absent sufficient regulation, the market dynamics will always end up with all power in the hands of a few major players. This is what is happening here. Looks like is is not the FED that can fix it, it is the SEC and DOJ.

[0] https://www.rawstory.com/amp/gop-party-of-business-265994473...

[1] https://www.bloomberg.com/news/articles/2012-09-14/radiating...

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

#259

Post by sobkas »

yanderekko wrote: post #108
arcticbull wrote: post #86

Earlier 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…

> 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 they can get away with hiking the price - in this case the price hikes are the consequence of the currency devaluation, not the cause.

Then they can increase prices two, three or four times and because they have inflation as excuse no one will say a bad word against them. On top of that they hold their suppliers by the throat so they will be able to keep surplus of money in their pocket. Hence astronomical revenue they have during "inflation".

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

#260

Post by npteljes »

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.

>economics teaches us when a player overcharges, others will step in to undercut and take all the market share.

A take I've read and stuck with me is that right now, there's also significant risk. In my country, Hungary, there are also losses introduced by the government, which capped the prices of several popular items. A way for a business to stay afloat is to incorporate this risk into their prices - and I think that this risk also makes the other players more hesitant to undercut. And thereby they all enjoy the benefit of the higher price.

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