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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

#181

Post by mrguyorama »

nine_k wrote: post #119
coliveira wrote: post #76

Earlier quoted context omitted.

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).

Except the leaders of a competitor will almost always take a big exit and let the private company be bought, because fuck you, got mine. You only need to convince a few people to take a payday, and most people are not running businesses out of some strongly held ideology of public market competition, but rather because they want to be rich.

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

#182

Post by NoboruWataya »

coliveira wrote: post #152
nr378 wrote: post #87

Businesses are always greedy. The fact corporate profits are up is an effect of inflation, not a cause. A good essay on the topic is: https://www.economicforces.xyz/p/greedflation-lets-try-this-...

You have to choose: they're either greedy or they cannot do anything about prices. If they are not driving prices to increase profits, then you can't say they're greedy. They're just doing whatever they can in a situation they don't have any control (they should also be fired and replaced by someone who can improve pricing).

I don't really get what you mean. They are always greedy, meaning they will always set prices at the level that is most profitable for them. Which simplistically means they will increase prices until the impact of higher prices on sales outweighs the impact on margins.

So their ability to set prices is constrained, principally by competition as well as the tendency of consumers to simply do without if the price is too high. When there is more money in the economy (eg, due to lower interest rates), consumers will tolerate higher prices for the same goods. Thus corporations have a greater ability to set prices, and they react, predictably, by increasing those prices.

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

#184

Post by ke88y »

mrguyorama wrote: post #179
ke88y wrote: post #171

Earlier quoted context omitted.

From a textbook economic perspective you are, of course, correct. And your conclusion that we shouldn't hate the player is also correct! But that doesn't mean that we can't hate the game. Capital-isms and market competition are two very different things. Currently we have A LOT of capitalism AND very uncompetitive markets. What we need are competitive markets, and the -isms hawked by the multi-generational holders of…

Nobody is ever forced to "play the game" so you absolutely SHOULD hate the player. They are choosing the play a game that hurts others and rewards them.

Hating holders of capital isn't effective, either rhetorically or as a policy motivator, at least in the west, at least for now. I mean this in the descriptive sense, not as a moral or personal opinion.

Stronger anti-trust, stronger worker's rights, more equitable ownership of firms/real property/capital, etc. -- none of this requires hate, and most of it is actually entirely consistent with the bedrock principles of late 20th century Capital-isms.

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

#185

Post by mrguyorama »

BetaDeltaAlpha wrote: post #94
coliveira wrote: post #76

Earlier quoted context omitted.

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.

How many times can they keep raising money to do that? There's not endless liquidity in the system (until rates go to zero again).

You don't need to raise money to do that, because your profits being high from lack of competition allows you to build up a nice war chest, then spend it on protecting that lack of competition. It's not difficult at all, it's literally how every single area of commerce right now is owned by like two giant conglomerates. From tools to bathroom cleaners to crackers.

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

#186

Post by sschueller »

zpeti wrote: post #134
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…

And the EU is an extremely heavily regulated market, with almost no real innovation, just check how many startup unicorns there are vs any other part of the world.

How does a startup unicorn have anything to do with innovation? All a startup unicorn proves its ability to convince early investors they will make a big exit eventually.

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

#187

Post by throwawaymaths »

spencerchubb wrote: post #168
throwawaymaths wrote: post #137

Earlier quoted context omitted.

Bad take. If the market "functions" according to your definition, then what is the incentive to innovate? (besides shits and giggles, which is not sustainable). No markets are efficient. While it's probably a bad idea to worship at the altar of profit: A profit of zero for most productive pursuits is not ideal.

Nobody has ever claimed that markets are efficient, so that's a strawman. The supply and demand model states that markets tend toward efficiency. When there is inefficiency, then someone can exploit it for their benefit while bringing the market closer to efficiency.

> strawman

Did we read the same gp which claims that market efficiency is an ideal to be had?

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

#188

Post by ClumsyPilot »

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.

I ama amazed how ahistorival this statement is. Its like from a parrallel universe.

Look at the last 4 times inflation yas gone through the roof - every time it was a supply shock, a trafe embargo or a war.

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

#189

Post by surement »

ketzu wrote: post #53

The interesting thing about the graph is, as far back as it goes, the contributors fluctuate but seem not unusual or unexpected. So companies are not extraordinarily greedy right now, they act the same as ever, just more do so. My personal, uneducated, unverified hypothesis was that companies overcompensate price increases for three main reasons: * They assume consumers dislike many small price increases. The current…

> My personal, uneducated, unverified hypothesis was that companies overcompensate price increases for three main reasons:

profit-maximizing sellers can only increase prices if demand rises, otherwise they will sell fewer units at the higher price (and if they could've made more money selling fewer units at a higher price then we can assume that they were already doing that because they are profit maximizing)

the only way that demand can rise (allowing prices to rise) in unison is if there is more money going around, which is what happens when the money printer goes brr, which it did https://fred.stlouisfed.org/series/M1SL

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

#190

Post by matrix_overload »

AndrewKemendo wrote: post #173
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…

Yes and the first step to solving the problem is acknowledging it. In order to change some thing you have to prove that it’s happening. In the case of “What underlying structure creates society’s problems,” increasingly more research is pointing to inequality itself and lack of democratic participation/ownership in the economy. These are the foundational factors driving poverty and precarious economic conditions for…

The answer is competition. Most of markets nowadays are dominated by 2-5 big players with the CEOs going to the same golf club. Wink-wink, nudge-nudge, prices go up, nobody can do nothing.

If we had 50 competing players, there would be enough incentive for a hungry challenger to lower prices and undercut the competition. Except, over a decade of leveraged acquisitions and antitrust regulators being asleep at the wheel killed the most remote chances of this happening in our lifetime.

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