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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

#281

Post by toss1 »

listenallyall wrote: post #268
toss1 wrote: post #258

Earlier quoted context omitted.

>>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?

I'm claiming that the 50s, 60s, and early 70s were the peak[0].

Yes, yes, the economy did take a hit in the 70s before Reagan took office, but it is quite obvious that that inflation was a combination of extrinsic geopolitical influences and Nixon's abandoning the Gold Standard.

Absent a huge anti-working-class / anti-union push, and shutting down most anti-trust enforcement, recovery of the working class would have been a lot faster and would be a lot further ahead.

Instead, as you can see from the chart, it has literally taken 50 years for the working class to just get back to the same level as 1973...

I don't see any argument that large corporate power, especially pricing power, has somehow declined since Reagan stopped enforcing antitrust laws. Since this is a long-term slow effect, we're seeing the cumulative results now. Most of inflation is NOT materials or labor cost increases, it is corporate profits increases. In a reasonably-regulated (e.g., regulatory bodies not captured by large corporations themselves) economy, this would not be possible. but here we are.

[0] https://www.weforum.org/agenda/2019/04/50-years-of-us-wages-...

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

#282

Post by WalterBright »

ShadowBanThis01 wrote: post #140
WalterBright wrote: post #137

Inflation is caused by an increase in the supply of money relative to the value of goods and services they represent. It's simply the Law of Supply & Demand in action. Where did the extra money come from? The federal deficit creates the money to fund the deficit. The future deficits in Biden's budget will cause a lot more inflation. There's no such thing as a free lunch. We will all pay for those deficits.

Over-simplified and not true when oligopolies run rampant. Higher interest rates have one squat, and that’s why. Yet no one is hammering the government on it. HUH.

> not true when oligopolies run rampant

Oligopolies are not able to increase the money supply by charging higher prices, so they cannot create inflation.

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

#284

Post by Jochim »

s1artibartfast wrote: post #267
Jochim wrote: post #264

Earlier quoted context omitted.

> 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.

I wasn't arguing the merits of price gouging, rather that as opposed to what CPI figures may suggest, the poorest have been hit much harder, by much higher inflation than those better off.

Seeing as we're now on the topic. Demand may be high where you are but that certainly doesn't hold true in the UK. The statistics show clearly that people are buying less[0] and getting less for it.

Retail volume is down 3.1% on 2022 across the board, there's literally a chart titled "Divergence between retail sales volumes and values"[1] showing how severely people are being squeezed. Figure 4[2] breaks out the same data for food retail specifically.

While certain demographics have been able to somewhat keep up with rising prices, the reality is that some food banks are having to distribute 50% more than they did pre-pandemic[3]. Real disposable income is already well below 2020 levels and expected to erase a decade of "growth" as it nosedives towards that of 2013[4].

[0] https://www.ons.gov.uk/businessindustryandtrade/retailindust...

[1] https://www.ons.gov.uk/chartimage?uri=/businessindustryandtr...

[2] https://www.ons.gov.uk/chartimage?uri=/businessindustryandtr...

[3] https://www.theguardian.com/society/2023/feb/19/record-numbe... depending-on-food-banks

[4] https://obr.uk/docs/dlm_uploads/CCS0822661240-002_SECURE_OBR.... page 18 (page 22 of the pdf).

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

#285

Post by greenfield1 »

willis936 wrote: post #224
greenfield1 wrote: post #220

Earlier quoted context omitted.

> 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…

> 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.

Wages are where the two parties met. It's high enough so the seller of the good (employee) is ok with selling and it's low enough so the buyer of the good (employer) is ok with buying. As long as they do business with each other, they are apparently both deciding, rationally, that this is an acceptable deal. Better than the alternative.

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

Great that they are leaving! They should be leaving! Cause then, and only then, will businesses be driven closer to raising wages since the sweet spot in the above equilibrium moves upwards.

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

Well in the Bay Area, the market is highly distorted. Lots of NIMBY zoning rules preventing high density housing being built. People sitting on detached homes because they can't afford to move. This heavily distorts housing costs which then impacts salaries since all those tech workers need to live somewhere. Big tech and VC-funded not-as-big tech is floating in money, so can afford to push salaries/compensation higher and higher. It's the market, but it's not pretty and it's heavily distorted.

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

#286

Post by greenfield1 »

DrNosferatu wrote: post #229
greenfield1 wrote: post #218

Earlier quoted context omitted.

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.

Why "natural, fair chance"? Of course they see what their competitors charge. That's one of the ingredients of a free market. The quicker they react, the quicker the information is dissipated in the free market.

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

#287

Post by jaggederest »

listenallyall wrote: post #261
jaggederest wrote: post #215

Earlier quoted context omitted.

> 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

I would question whether the measure we should be concerned with is "recession or not" - everything can be getting worse while simultaneously corporate profits are high. That's kind of by definition what short-term thinking gets you - cash in hand but ruined infrastructure and societal safety nets.

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

#288

Post by _hypx »

andromeduck wrote: post #169
_hypx wrote: post #32

Earlier quoted context omitted.

Some companies are playing with fire by charging so much. A notable example is Nvidia, which is basically crippling its own lineup with their weak specs and high prices.

That's more because supply shortage from the bens of moore's law and design costs are still exponentially growing so there's incentive to slow walk your development/release to maximize lifetime value.

They're charging way more than what cost increases can justify. Some of their new cards have very small performance increases. Others are cripple by having way too little VRAM. But they're still charging way more money than the last generation.

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

#289

Post by listenallyall »

jaggederest wrote: post #287
listenallyall wrote: post #261

Earlier quoted context omitted.

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

I would question whether the measure we should be concerned with is "recession or not" - everything can be getting worse while simultaneously corporate profits are high. That's kind of by definition what short-term thinking gets you - cash in hand but ruined infrastructure and societal safety nets.

You can always find negative things if you go looking for them. The reason people care so much about "income inequality" rather than "poverty rates" is that poverty has declined dramatically around the globe. So doom-and-gloomers shifted the goalposts and ignore successful results.

You can't accuse corporate CEOs of short-term thinking and then use infrastructure and "societal safety nets" as the measurements -- CEOs are responsible for the success of their company, not of the well-being of an entire society, that's the government's job.

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

#290

Post by listenallyall »

toss1 wrote: post #281
listenallyall wrote: post #268

Earlier quoted context omitted.

> 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?

I'm claiming that the 50s, 60s, and early 70s were the peak[0]. Yes, yes, the economy did take a hit in the 70s before Reagan took office, but it is quite obvious that that inflation was a combination of extrinsic geopolitical influences and Nixon's abandoning the Gold Standard. Absent a huge anti-working-class / anti-union push, and shutting down most anti-trust enforcement, recovery of the working class would have…

> I'm claiming that the 50s, 60s, and early 70s were the peak

So before computers kicked off unprecedented productivity increases, and before standardized shipping containers enabled manufacturing to be relocated globally.

But sure, go ahead and blame Ronald Reagan.

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