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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

#191

Post by abeppu »

NoboruWataya wrote: post #166
abeppu wrote: post #104

Does this make anyone else spitefully want to spend less, even though they don't have to? My econ training is very limited, and perhaps this is a pointless idea, but - the central bank approach to curbing inflation seems to assume that actors in the economy won't change their spending patterns (and decrease firms' price-setting power) until they're unable to continue (i.e. are laid off, can't access financing, etc) o…

If you want to boycott every corporation that is trying to increase profits, you will lead a highly ascetic life. That said, what you are saying isn't entirely untrue, and in fact is considered conventional wisdom by many. If everyone was a lot more price sensitive and more willing to forego discretionary spending, then yes, profit margins and prices would probably be lower. When boomers talk about millennials and th…

I don't think people need to fully boycott every company -- but we can deliberately attempt to decrease companies' pricing power by:

- voluntarily reduce discretionary spending across categories

- within each product category, try to spend most on the company with the thinnest margins (which may not be the cheapest)

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

#192

Post by legitster »

lovich wrote: post #144
legitster wrote: post #139

Earlier quoted context omitted.

He's diagnosing runaway inflation. At no point is actually chastising workers directly. Bailey's comments were squarely aimed at blaming Brexit and energy markets, people intentionally took his words out of context to bake up a "gaff".

>… when he suggested workers shouldn’t ask for big wage increases… How is that not directly telling workers to not ask for wage increases? I’d also say adding the word “chastising” is changing the tone of what the original commentor and I were referencing when talking about governments asking workers to not ask for wage increases.

The author is doing a lot of heavy lifting with the word "suggesting". I can't find any quote that suggests he is actually saying workers shouldn't ask for raises. Here's the closest I could find:

"To do that I have to be clear – and we expect inflation to come down this year – to do that we cannot continue to have the current level of wage increases ... And we can't have companies seeking to rebuild profit margins which mean prices continue to go up at their current rates...But what I would say to people is we expect inflation to come down, and it is important then that price setting and wage setting reflects that."

Again, nothing "suggests" that he thinks workers are supposed to be blamed for wage increases being unsustainable. If anything he is blaming corporations!

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

#193

Post by mrguyorama »

concordDance wrote: post #78
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 the question they are asking is: why now? Were companies not wanting to maximize profits 5 years ago?

Surely nothing happened in the past couple years that demonstrated people can absorb some extra costs?

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

#194

Post by throwawaymaths »

rthrfrd wrote: post #164
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.

Innovation gives you a valuable competitive advantage - that doesn’t mean it lasts forever - that’s why companies have to constantly develop to stay competitive. Or, they gain enough power to create a failed market, in which it is practically impossible for new entrants to compete and eliminate the incumbent’s rent-seeking. This is what we so often see now, particular in markets with strong economies of scale. An “ef…

> An “efficient market” does not mean it is at its optimal efficiency all the time, but that there is an efficient equilibrium it is capable of tending towards

This is a word salad of nonsense. Please familiarize yourself with the definitions of market efficiency and market equilibrium. Its premise may even be flawed: I also recommend looking up resources which show evidence that concept of market equilibria is itself nonsensical.

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

#195

Post by yanderekko »

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…

>Remember: profits are a direct measure of the inefficiency of a given market.

Marginal profits are, not absolute profits..

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

#196

Post by mrguyorama »

the_gastropod wrote: post #151
horsawlarway wrote: post #100

Earlier quoted context omitted.

I know right - it's certainly not like that Paul Volcker fella has any fucking clue what he's talking about. --- To quote the man himself, when referring to how he was going to solve inflation: "But none of these policies, important as they are, can substitute for commitments to fiscal prudence and restraint on the money supply."

This isn't to suggest money supply has no impact on inflation—of course it does. There's a reason Powell increased interest rates, after all. But the simplistic "MONEY PRINTER GO BRRR INFLATION LUL" meme can generally be chalked up to belief in conspiracy-theory nonsense.

> can generally be chalked up to belief in conspiracy-theory nonsense.

Or worse, watching a few "economics" youtube videos and thinking you understand how the world works.

Surely we should just go back to the gold standard! That didn't have regular destructive and unavoidable problems all the damn time!

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

#197

Post by jameshart »

legitster wrote: post #139
lovich wrote: post #121

Earlier quoted context omitted.

> 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...

He's diagnosing runaway inflation. At no point is actually chastising workers directly. Bailey's comments were squarely aimed at blaming Brexit and energy markets, people intentionally took his words out of context to bake up a "gaff".

The BoE has been banging the wage restraint drum for a while. Bailey on the Today Program in February:

“I’m not saying nobody gets a pay rise, don’t get me wrong. But what I am saying is, we do need to see restraint in pay bargaining, otherwise it will get out of control.”

Back in May, his Chief Economist Huw Pill got in trouble for expressing the sentiment thusly:

“Somehow in the UK, someone needs to accept that they're worse off and stop trying to maintain their real spending power by bidding up prices, whether higher wages or passing energy costs through on to customers,” which Bailey had to walk back.

Last week on Sky News, he was pitching a version of that same position, though, that balanced calls for wage restraint with calls for companies to exercises restraint on profit margins also:

“We've got to get and we will get inflation back to its target. To do that … we cannot continue to have the current level of wage increases, and we can't have companies seeking to rebuild profit margins which mean prices continue to go up at their current rates.”

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

#198

Post by surement »

alexaholic wrote: post #133
Barrin92 wrote: post #64

Earlier quoted context omitted.

Because the basic economic argument against this theory is pretty sound. Companies can't arbitrarily raise prices because market competition drives profits down. It's why highly competitive industries like the restaurant sector aren't profitable, everyone competes for the same consumers, and the lowest cost provider will win. Inflation doesn't actually change anything about this so if companies can just collude and m…

> Companies can't arbitrarily raise prices The article suggests this is false

then you know it's not a great article.

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

#199

Post by refurb »

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?!?

Exactly.

And even if you were to blame companies for raising prices, the only reason they had the opportunity to do it was because of excessive monetary policy which started the inflationary spiral.

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

#200

Post by hgs3 »

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.

I don't disagree or agree, but it often seems like the economy is 1% actual innovation and 99% phony innovation. For instance, most business apps are all the same app under the hood (e.g. a CRUD app) with the only difference being the type of data being stored. A lot of technology is fundamentally "done" but keeps receiving cosmetic changes presumably so the employees can justify their paycheck and business folks have something to market. None of these are "innovations" despite being marketed as such.
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