Why is inflation so sticky? It could be corporate profits • Hacker News Board

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

#261

Post by listenallyall » Wed, May 03, 2023, 3:17 PM UTC

jaggederest wrote: post #215

listenallyall wrote: post #168

Earlier quoted context omitted.

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.

I'm not claiming there will never be another downturn -- of course there will be -- but the fact that we just went through the longest non-recessionary period in this country's history, despite all the "short-termism" already indicates at least some flaws in the original hypothesis

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

#262

Post by jfengel » Wed, May 03, 2023, 3:24 PM UTC

baryphonic wrote: post #44

jfengel wrote: post #5

Earlier quoted context omitted.

That is what the first two weeks of economics teaches. The rest of the curriculum is about how wrong that is.

That wasn't my experience. Intro to micro had the simplified model throughout. Intermediate & advanced macro are all math. Macro at all levels is Keynesian theory plus increasing levels of math. IMO, much of macro resembled alchemy. Several upper-level classes, though by no means all, took the assumptions in earlier classes, tore them down, and then re-built economics from there. These are assumptions like preference…

What the OP is describing is the frictionless, perfect-cylinder, massless-pulley version of Newtonian physics. Even a first semester econ class can talk about things like startup costs, inelastic demand, information asymmetry, and other things that make "a new business will spring up with lower margins" Just Plain Wrong.

Economics has "friction", too.

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

#263

Post by listenallyall » Wed, May 03, 2023, 3:30 PM UTC

RhodesianHunter wrote: post #228

listenallyall wrote: post #168

Earlier quoted context omitted.

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?

Been hearing "unsustainable" for a long time. I believed it wholeheartedly for a while. Sure, we will have recessions again, perhaps we're in one presently, but do you think the USA is going to somehow collapse? It will likely see a gradual decline in living standards, I agree, but you are overlooking how bad the 70s were economically, when the Baby Boomers were in their 20s and 30s.

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

#264

Post by Jochim » Wed, May 03, 2023, 3:32 PM UTC

bell-cot wrote: post #165

mjevans wrote: 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…

> 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 heavily processed or prepared food, or restaurant food...that's an order of magnitude more expensive. And many parts of the food industry are far too consolidated to be competitive.

The people already doing so are absolutely fucked.

While potentially still cheaper, those basic staples have typically seen a disproportionately large rise in their price. The price of porridge oats and milk increased by over 30% in the UK between 2022-2023[0]. Own brand plain dried pasta went up by 41% in one, relatively cheap, supermarket[1].

CPI as a whole is at 8.9% but food is at 19.2%[2].

That's not even accounting for the noticeable inflation in the price of the cheapest goods that occurred prior or energy bills more than quadrupling between 2019 and 2023, even before Ukraine they had nearly doubled.

[0] https://www.theguardian.com/business/2023/apr/18/cost-of-bri... [1] https://www.pressandjournal.co.uk/fp/news/5682202/food-price... [2] https://www.ons.gov.uk/economy/inflationandpriceindices/bull...

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

#265

Post by Jochim » Wed, May 03, 2023, 3:34 PM UTC

HPsquared wrote: post #181

bell-cot wrote: post #172

Earlier quoted context omitted.

> 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…

Push it too far and people will just "lie flat", i.e. check out of the economy.

Some will, others will rightfully turn to crime.

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

#266

Post by s1artibartfast » Wed, May 03, 2023, 3:36 PM UTC

arcticbull wrote: post #86

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…

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…

I think Pepsi and Coke are really interesting example because they are not necessary to live. Many of the arguments in this thread rely on the idea that companies are coordinating to price gouge for life-sustaining Goods. If that were the case why do we see inflation in optional Goods as well

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

#267

Post by s1artibartfast » Wed, May 03, 2023, 3:43 PM UTC

Jochim wrote: post #264

bell-cot wrote: post #165

Earlier quoted context omitted.

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…

> 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 heavily processed or prepared food, or restaurant food...that's an order of magnitude more expensive. And many parts of the food industry are far too consolidated to be competitive. The people already doing so are absolutely fucked. While potentially still cheaper, those basic…

The argument that undermines the price gouging theory is that consumer demand for optional Goods remains High and is also inflating. This indicates that consumers are not responding to higher prices by decreasing demand.

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

#268

Post by listenallyall » Wed, May 03, 2023, 3:54 PM UTC

toss1 wrote: post #258

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…

> The most propserous times and bigges middle class ended with the Reagan administration

Reagan took office in 1981. So you're claiming that the late 70s -- oil embargo, hostages, double-digit inflation and unemployment -- were "the most prosperous times"? Really?

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

#269

Post by scarab92 » Wed, May 03, 2023, 3:56 PM UTC

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…

Microsoft were blatant about this anticompetitive pricing strategy with Azure.

AWS used to frequently cut prices.

Azure started immediately matching the price cuts exactly.

The tacit message to AWS was don’t cut your price because we’ll immediately remove any competitive advantage you would get from doing it.

AWS largely stopped cutting prices after that.

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

#270

Post by IshKebab » Wed, May 03, 2023, 4:04 PM UTC

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-...

Vodafone did the same - CPI (10.5%) + 3.9% "to help support the continued investment in our network as we expand coverage". I guess 3.9% is some government limit?