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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

#201

Post by JKCalhoun »

ke88y wrote: post #171
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…

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…

> Currently we have A LOT of capitalism AND very uncompetitive markets.

I've been bemoaning lately the degree to which we ('ordinary folks' as they say) are essentially shut out of whole industries.

Want to open a grocery store and go against the local Kroger? A drug store and go against the local CVS? A hardware store and go against the local Lowe's?

I think the only way I can get into the new-car dealership aristocracy here in LOCAL_TOWN_USA is to marry into it.

Restaurants, nail salons, small trades, franchisee.... It's good that they left us a few scraps I guess.

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

#202

Post by runarberg »

kortilla wrote: post #97
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 argue both, that’s what this article shows. They can shout from the hilltops to “stop asking for more everyone!”, but it’s not going to help without actual action to force it.

This may be the case, however somehow it seems it is usually wages which stagnate while profits skyrocket.

Either the government is unable or unwilling to enforce this equally. If unable, they are incompetent, if unwilling, than they are corrupt. In either case we live in a corporatocracy not democracy.

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

#203

Post by hnboredhn »

coliveira wrote: post #88
hnboredhn wrote: post #70

Earlier quoted context omitted.

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.

They always want to maximize profits, but they don't have this opportunity every day. They will increase their profits if there is a convenient reason like "inflation".

I guess I'm still not convinced the "reasoning" has anything to do with it.

If a company says the reason is inflation they can only maintain that pricing power if every other firm does the same thing. If no firm decides to keep prices the same, to steal more of the market, that suggests to me that either inflation is real (perhaps in a harder to quantify way than just supplies) or companies have much more consolidated competitors than they used to (perhaps start up costs are now high so new entrants become impossible).

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

#204

Post by GFlaneur »

darksofa wrote: post #180

Milton Friedman - Only governments create inflation https://youtu.be/F94jGTWNWsA “Inflation is made in Washington because only Washington can create money. Any other attribution to other groups of inflation is wrong.”

In all advanced economies - majority of money is created by bank loans (including mortgages) rather than by the the central bank.

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

#205

Post by refurb »

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

Look at excess reserves at the Fed.

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

2.8T dollars being held at the Fed. It never entered circulation.

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

#206

Post by medion »

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…

How do you explain weird markets like the luxury sector then?

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

#207

Post by thescriptkiddie »

throwawaymaths wrote: post #137
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…

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.

There never was an incentive to innovate, unless by "innovate" you mean drive the cost of production down below that of your competitors.

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

#208

Post by mrguyorama »

m-ee wrote: post #44
toomuchtodo wrote: post #20

Earlier quoted context omitted.

Because they didn't know the pricing power they had. The macro gave them cover to stretch and see what would happen.

A lot of economics seems to me like the “perfectly spherical cow in a vacuum” jokes you hear about physics. There’s no concept of friction or activation energy. “The market” simply adjusts in real time without human interaction. In the real world someone needs to pitch a price increase. There’s risk that sales and profits might drop. That’s bad for the company and that persons career. When everyone else is raising pr…

It's because if you are involved in economics, you've already bought the "markets are the most efficient by definition" dogma, so you cannot question that maybe untestable wild ass-pull theories from some dude writing a book aren't actually an accurate model of the real world.

Economics is at the level of aristotlian physics: "Surely lighter objects fall slower, it just makes sense and I have demonstrated so with this feather!" was the law of physics for millennia until someone actually decided to measure it in a way that could isolate the force of gravity.

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

#209

Post by marcosdumay »

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…

Ok, you are pushing your definitions into unreasonable territory.

A central bank saying inflation is caused by high wages is exactly the same as the government telling people they should get a lower wage. There is no practical difference.

It is in fact worse, because the central bank tends to act on that phrase. So the government not only tells people they should earn less, but forces their hands into that.

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

#210

Post by talkingtab »

The terminology we use is important. We call this "inflation" - things cost more. But it is not "things costing more" it is corporations extracting the wealth of the citizens. The cost of gas did go up, but the profits that gas companies went up at least as much.

Money is like water, you need it to flow to do good. When it is dammed up by corporations it does no good. We will not survive if we allow corporation to continually generate larger profits while paying wages that do not provide a living wage to people.

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