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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

#231

Post by mrguyorama »

ke88y wrote: post #184
mrguyorama wrote: post #179

Earlier quoted context omitted.

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…

Funny, because the way the US got most of it's worker rights and protections was pretty violent strikes in the early 1900s. It used to be reasonable for your union to have arms, and be shot at by the pinkertons. Employers, I don't care why, choose to do whatever it takes to keep me paid poorly and without power, and not hating that is just pathetic.

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

#232

Post by badpun »

legitster wrote: post #127

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. Su…

Margins go up, but volume comes down, so hard to tell if the overall profits will increase or decrease.

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

#233

Post by skippyboxedhero »

seizethecheese wrote: post #34

This is a write up of a working paper, not published yet. Here’s the link to the actual paper: https://www.imf.org/en/Publications/WP/Issues/2023/06/23/Eur... Here’s the abstract: > We document the importance of import prices and domestic profits as a counterpart to the recent increase in euro area inflation. Through a novel consumption deflator decomposition, we show that import prices account for 40 percent of the…

In the US, these statistics are recorded. It is very easy to say that corporate profits are increasing...because corporate profits are reported.

In the EU, these statistics aren't recorded so it is very hard to say whether this is correct or why. This paper is built from the very top-level of stats, I don't see any problem with the theory (decomposing the GDP deflator into components) but the lack of granularity with the data is problematic imo, particularly when you are looking at explanations.

In particular, as the paper acknowledges, previous periods showed that firms increased their profit share because they expected future wage increases. This is one of the problems with the data in that there is lags and leads, granular data allows you to more precise about why this is happening.

Also, equating the GDP deflator with actual profitability seems extremely unsound to me. In aggregate, fine. But the paper is talking about profit share not actual profitability. So profits can actually fall, and this method can show they are increasing...that is possible.

Either way, this paper isn't particularly useful and, as the authors well know, everyone will read what they want into this. It is known that the EU has poor competition, it is known that wage growth is probably the most important component of inflation...there isn't really anything particularly new here.

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

#234

Post by ccorcos »

talkingtab wrote: post #210

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 co…

Another angle on a solution: start your own gas company with competitive margins.

Easier said than done, obviously. But maybe we should try to make it easier?

I can imagine a downward spiral of government regulation creating moats for companies that take advantage of the lack of competition, leading to ever more government interventions that further entrench the status quo.

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

#235

Post by hayst4ck »

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…

Likewise, wages are not a measurement of labor, but a measurement of market power.

If wages are going down or stagnating, that is an indicator of loss of labor market power and loss of labor power in general.

It's also important to understand that some people earn in proportion to what they own/their capital, while others earn in proportion to their time.

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

#236

Post by ultrarunner »

dantheman wrote: post #85
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.

That can only go on for so long; if people see companies buying out competitors people will jump to create more and more competitors for the easy exit.

That would be true if not for regulatory burdens that larger companies can afford to shoulder. We just watched a progression from "OpenAI has no moat" to OpenAI begging Congress for regulations to stop them from killing grandma. If you can't get a foothold in the market there's no point in acquiring you.

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

#237

Post by marcod »

bigfudge wrote: post #225

Can I hijack this thread to ask a ‘dumb’ question: If the point of high interest rates is to take money out of the economy, would it not be more effective and fairer to simply raise taxes and pay down debt or avoid taking on more debt in the current year? I can see this wouldn’t encourage saving, but the taxes could be targeted on things which are supply constrained…

In my mind this is the old “If the only tool you have is a hammer, you tend to see every problem as a nail.”

They can raise or decrease the interest rates as its governing body sees fit.

To raise taxes or pay debt requires approval from the Legislature and that seems hard to come by.

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

#238

Post by batmaniam »

Jon Stewart touches on this issue (but for the US): https://www.youtube.com/watch?v=tU3rGFyN5uQ

It's rather funny (and sad) to watch the entire conversation reflecting how inflation solutions are geared towards benefiting corporations over the people.

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

#239

Post by jasonsb »

mjburgess wrote: post #129
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.

Why use very fancy word to say nothing when few word do trick?

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

#240

Post by [deleted] »

soperj wrote: post #51
bedobi wrote: post #35

Earlier quoted context omitted.

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

They hadn't even hit a trillion in 2010. Since then they've printed 1.3 trillion. 500 billion in the 3 years. I think the amount matters.

[deleted]
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