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Corporate profits account for almost half the increase in Europe’s inflation

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Re: Corporate profits account for almost half the increase in Europe’s inflation

#111

Post by jjoonathan »

cortesoft wrote: post #71
rgbrenner wrote: post #33

I think this talk about costs vs profits sounds important to lay people, but is completely irrelevant. Companies do not price goods based on the goodness of their hearts. They price it at the point that maximizes volume*(unit price-COGS). Companies are constantly testing this price point. For example, a promotion may produce data that can indicate how consumers will respond to a price change. In an inflationary perio…

This is exactly my reaction whenever I see things like this. Profit margins are not the DRIVER for any of these market changes, they are the end result of all the various factors at play.

The profit motive & margins fund lobbyists and political campaigns to change policies that absolutely drive these market changes.

We could choose to have anti-trust measures with teeth. We could choose to tax assets. We could have progressive corporate taxes to encourage smaller company sizes and more public transparency. There are so many things we could choose, but the ones that we do choose are the ones that shareholders lobby into place to generate ROI.

This is either a feature or a bug, depending on whether your income flows through line 1 or line 7 of your 1040.

Re: Corporate profits account for almost half the increase in Europe’s inflation

#112

Post by ajsnigrutin »

rgbrenner wrote: post #33

I think this talk about costs vs profits sounds important to lay people, but is completely irrelevant. Companies do not price goods based on the goodness of their hearts. They price it at the point that maximizes volume*(unit price-COGS). Companies are constantly testing this price point. For example, a promotion may produce data that can indicate how consumers will respond to a price change. In an inflationary perio…

The problem here, especially if the prices are rising higher than wages is, that sooner or later the basic necessities (food, shelter, ...) reach a level, where people can barely pay them, and all the other industries suffer, because consumers don't have any leftover money for luxuries, gadgets, etc.

Some prices (mostly services) can be adjusted, some could be (rents, housing, mostly by rezoning and building more), but due to "reasons" (mostly local and national governments holding back) they aren't (until someone compares the average pension to average rent and instead buys a sniper gun and finds the responsible politician). Some prices are also stuck due to politicians doing their dick-measuring competitions ending in sanctions for countries that have stuff other countries need, and industries shutting down because that stuff became too expensive there.

On the other hand, we did print A LOT of money in the last few years, and blaming everyone else except (also) the ones who have the power to print is just stupid.

Re: Corporate profits account for almost half the increase in Europe’s inflation

#113

Post by dantheman »

edrxty wrote: post #15
coding123 wrote: post #11

So, for the United States - we should be pointing fingers at one or two things... Is it a) the FTC has not stopped bad mergers. Too much power over the price of food/gas/etc... in control by 1 company. Or b) actual price collusion. From my personal research price collusion has become "legalized" through a cottage industry of "price analyst" companies that provide "good guestimates" of what gas, food, etc... should be…

In terms of price collision the big one is rent, there are a couple companies that sell software to literally all of the institutional landlords which determines what pricing should be for each market. The only reason rent isn't currently going through the roof was that corporate fad of buying up every property under the sun for nice reliable income.

Why could corporations and anyone else buy up everything - was it perhaps absurdly low interest rates?

Re: Corporate profits account for almost half the increase in Europe’s inflation

#114

Post by mo_42 »

rgbrenner wrote: post #33

I think this talk about costs vs profits sounds important to lay people, but is completely irrelevant. Companies do not price goods based on the goodness of their hearts. They price it at the point that maximizes volume*(unit price-COGS). Companies are constantly testing this price point. For example, a promotion may produce data that can indicate how consumers will respond to a price change. In an inflationary perio…

Technically, the companies guess the price elasticity of a product. This tells them how a price change influences demand. Then, it’s a simple calculation to choose the right price.

Re: Corporate profits account for almost half the increase in Europe’s inflation

#115

Post by lclc »

nostromo wrote: post #52

Inflation is caused by monetary policy. Did profits increase? Potentially, yes. But they couldn't have increased without the enabling condition of massive money printing. Companies were trying to maximize profits before 2020. That hasn't changed. What changed was the monetary policy.

This is the correct answer and it's disappointing to see that it gets downvoted.

Re: Corporate profits account for almost half the increase in Europe’s inflation

#116

Post by taude »

evancox100 wrote: post #103
rightbyte wrote: post #56

Earlier quoted context omitted.

> Companies do not price goods based on the goodness of their hearts. Governments etc. argue that employees should not demand higher pay to match inflation to avoid a "spiral" out of the goodness of their hearts. If employers catch the absolute currency value increase of inflation the employee employer balance is shifting.

What government is arguing that employee wages should be lower/stagnant in order to fight inflation? EDIT: I mean advocating not just that we should avoid a wage/price spiral through other means, but specifically that individual workers should accept/volunteer for lower wages than they could otherwise get? Edit 2: seeing several cases of "$Reserve_Bank_Person says wage increases are too high and need to come down", n…

Probably referring to news like this?

https://www.nytimes.com/2023/04/28/business/wage-inflation-m...

Re: Corporate profits account for almost half the increase in Europe’s inflation

#117

Post by [deleted] »

einpoklum wrote: post #68

Why, I am shocked - shocked and chagrined - to learn that inflation is caused by capitalists raising prices to increase profits. I might even end up believing that the market system does not ensure fair distribution of resources and products in society. Perish the thought.

[deleted]

Re: Corporate profits account for almost half the increase in Europe’s inflation

#118

Post by itsoktocry »

bedobi wrote: post #35
monero-xmr wrote: post #18

Ah yes ignore the money printing, certainly all of this inflation is the private sector! Where are the price caps?!?

how do you explain the fact that gazillions were printed for decades without much meaningful inflation? japan being the printiest of them all having had the least inflation of all crickets huh

>how do you explain the fact that gazillions were printed for decades without much meaningful inflation?

The amount of money printed since 2020 was literally unprecedented. Look at the M1 chart:

https://fred.stlouisfed.org/series/M1SL

>crickets huh

Japan has the highest levels of inflation they've seen in over 40 years.

Re: Corporate profits account for almost half the increase in Europe’s inflation

#119

Post by nine_k »

coliveira wrote: post #76
zozbot234 wrote: post #43

Earlier quoted context omitted.

> And this permits companies to increase prices, and produce higher profits. It's worth noting that this mostly reflects short-term pricing power. It takes a lot of time for new competitors to enter any industry. So we should expect these price increases to occur rarely and be somewhat time-limited as competition ultimately reestablishes itself.

Competition doesn't work correctly in modern economies because companies are allowed to buy their competitors. If you start competing with another company, they can essentially raise money to buy you and stop what would be the "normal" process. As a result, all theories that people have about how competition works don't apply as they think it should.

This works when the competitor goes public and thus can be bought in a hostile way.

Buying out and closing a completely private company is harder (though not impossible, given a right price).

Re: Corporate profits account for almost half the increase in Europe’s inflation

#120

Post by HumblyTossed »

legitster wrote: post #109
rightbyte wrote: post #56

Earlier quoted context omitted.

> Companies do not price goods based on the goodness of their hearts. Governments etc. argue that employees should not demand higher pay to match inflation to avoid a "spiral" out of the goodness of their hearts. If employers catch the absolute currency value increase of inflation the employee employer balance is shifting.

> Governments etc. argue that employees should not demand higher pay to match inflation to avoid a "spiral" out of the goodness of their hearts. Source?

Isnt this what Powell keeps saying?
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