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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

#121

Post by lovich »

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?

> While Bank of England Governor Andrew Bailey sparked a minor firestorm when he suggested workers shouldn’t ask for big wage increases…[1]

[1] https://www.bloomberg.com/news/articles/2022-03-17/powell-tr...

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

#122

Post by truckerbill »

kortilla wrote: post #105
alexaholic wrote: post #19

I find it hilarious when companies are following their stated goal of making profits, while everybody else is rushing to explaining rising prices by factoring in everything but profits.

Well it can’t be just profit seeking, companies have been doing that forever. Something has enabled them to raise prices without impacting sales.

It's tragedy of the commons. A series of events that have happened which has misaligned the market into an unspoken cartel. An opportunity (or temporary need) arose to raise prices and now they don't want to lower them. They are looking over their shoulder and their friendly rivals aren't doing so either.

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

#123

Post by bick_nyers »

hnboredhn wrote: post #70
alexaholic wrote: post #19

I find it hilarious when companies are following their stated goal of making profits, while everybody else is rushing to explaining rising prices by factoring in everything but profits.

I still don't find the argument persuasive. Companies have always tried to maximize profits, as you said. To me this highlights more companies realizing they have pricing power similar to monopoly power or cartel power. A company that has lots of competition can't raise its profit margins. But a company with a moat, where no competitors are able to fund the capital needed to compete, can raise profits.

If all of your competitors are also raising their prices then suddenly it becomes a lot less risky to also raise yours.

When the public perception is an environment of inflation, I think it unintentionally creates cartel power dynamics.

You don't need to collude with your competition on price fixing if the news is telling you that prices are going up for everything.

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

#124

Post by kortilla »

smt88 wrote: post #7
narcraft wrote: post #4

The cause of rain is the ground getting wet

This kind of reply is uninteresting and unhelpful. These statements about inflation drivers are surprising (to some) and highly relevant because they counter corporate and conservative propaganda. We now know that government assistance isn't the main villain in the brutal inflation spikes of the last few years, and we need voters to understand that too.

This kind of comment is also unhelpful because it assumes the conclusion. This chart only shows that both profit and inflation went up. There is no indicator that profit caused inflation.

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

#125

Post by exmicrosoldier »

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…

They are all about cutting those wages to 0. Less employment.

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

#126

Post by throwawaymaths »

This seems like a dumb headline. Suppose prices were going down because companies are testing prices and finding that volume is better than yield. Would we also get a headline "largest driver of price drops is corporate profits"?

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

#127

Post by legitster »

Example: I used to sell 100 hammers a year for $5 profit per hammer. My supplier says "There is a hammer shortage I can only give you 50 this year". Okay, so I raise the prices to the point that I know hammers are always on the shelf. And everyone else is short on hammers too, so no risk of losing sales.

I'm paying only a fraction more per hammer. Any my revenue is down. But my profit margins are through the roof.

Supply side issues will show up as profits purely as an accounting figment.

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

#128

Post by victor22 »

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.

Yes. This is a gaslighting piece from gvmnt (as always). Here in south america they blame inflation on natural causes (ie. "rice and beans are 60% more expensive this year because of the dry winter"). Nothing but disinformation.

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

#129

Post by mjburgess »

kibwen wrote: post #92

Remember: profits are a direct measure of the inefficiency of a given market. In a functioning market, the existence of profits either drives businesses to reduce their own profits by competing on price (problem: cartels) or else drives new businesses to emerge in order to seize some of those profits (problem: barriers to entry). To have record-breaking profits means that are markets are record-breakingly inefficient…

I think what people operating from vauely "austrian premeses" miss is: the pandemic.

We have no model of how a pandemic is going to "correlate" economic markets typically under competition.

I think it's highly likely that "supra-economic" shocks of the kind we've experienced have handed a strange unexpected market power that the usual (free market) suspects have yet to parse.

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