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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

#311

Post by dahwolf »

Reporting from the Netherlands. I'm not an economist, but I just don't understand how the current policy has any chance of lowering inflation.

Price increases here are in energy and groceries. In plenty of other things of course, but those are the two big ones hitting almost everybody severely. Most have already optimized their energy usage (some to the point of sitting in the cold) and optimized for more cost-effective grocery shopping.

And that's it. Energy and food are not very elastic beyond this. One can hike rates all they want but people need energy and food. The demand will not reduce, hence inflation cannot be lowered this way?

Further, if a rate hike is supposed to be a stimulant to save instead of spend, then why is savings interest at 1%? It's like setting your money on fire.

What you'll see happening is that the lower classes spend for not having a choice whilst middle class and higher keeps spending as they always did. If saving is a losing game, why not?

The normal result of a rate hike, elevated unemployment, isn't happening. We have a labor shortage instead. Hence this too will not curb demand.

It would seem obvious that energy prices are at the core of this. Hence, one way or another they have to be lowered. But then again, doing so would increase demand.

Yes, I'm totally lost.

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

#312

Post by LudwigNagasena »

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.

Ah, the ol’ good tactic of taking a straightforward statement, calling it a dog whistle and dismissing it.

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

#313

Post by ChuckNorris89 »

dahwolf wrote: post #311

Reporting from the Netherlands. I'm not an economist, but I just don't understand how the current policy has any chance of lowering inflation. Price increases here are in energy and groceries. In plenty of other things of course, but those are the two big ones hitting almost everybody severely. Most have already optimized their energy usage (some to the point of sitting in the cold) and optimized for more cost-effect…

>We have a labor shortage instead.

Not from the Netherlands, but the labor shortage I see Austria is mostly companies still trying to pay 2020 wages rather than a lack of people motivated toi switch jobs/immigrate.

Labor shortage here is just propaganda for "we can't find people willing to work at the salaries we want to pay". In similar fashion I have a constant Ferrari shortage because I can't seem to find these cars at the prices I'm wiling to pay.

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

#314

Post by ricardobeat »

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…

> This is what has happened to car sales: the manufacturer didnt capture the difference, so the dealership captured it instead

Only works because dealerships have a monopoly over local sales (i.e. not a free market). Otherwise everyone would be buying their car online without the markup.

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

#315

Post by beirut_bootleg »

frogperson wrote: post #301
beirut_bootleg wrote: post #298

There will come a moment in time when consumer wealth has been almost entirely absorbed, leaving businesses with no further profit to gain from traditional revenue streams. After years of relentless pursuit of profit, multinational corporations will have effectively captured a significant portion of the world's wealth, consolidating resources and power in the hands of a privileged few. Will the tipping point where no…

Businesses shouldn't be allowed to be one so large that healthy competition no longer exists. Right now our markets are sick, healthy competition should have driven prices back down, but that isn't what we see happening.

"sick" is right. A healthy market should be fine, but we have generations upon generations of chief money maker officers each trying to make line go up in the small window of time they're with the company. Repeat this enough times, and there won't be any more profit to be made.

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

#316

Post by [deleted] »

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…

[deleted]

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

#317

Post by tootie »

whimsicalism wrote: post #302
tootie wrote: post #267

Earlier quoted context omitted.

Prices going up and things costing more are synonymous. This is textbook inflation. Policy makers have to look at things from different angles. Central banks really can't do much of anything about structural problems. They can only raise or lower rates. They will put some weight on the distinction of core prices and volatile ones, but really they don't have any levers to affect profits or wages directly. That job goe…

> Windfall profits tax is a start, but what they do with the profits they collect is another. No one likes price controls, but taking short-term action or maybe enacting price stabilization could be very effective. You are talking gravely serious interventions and I really think you are missing the knockoff incentive effects.

Price controls have a bad reputation from there enforcement by corrupt and reactionary governments of the past, but there's a very strong case being made by mainstream economists that there's a path to doing it properly: https://www.project-syndicate.org/magazine/inflation-targete...

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

#318

Post by rcme »

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…

The U.S. Federal Reserve hasn’t advocated people voluntarily take a lower wage, but they have explicitly stated that their goal for raising rates is to put people out of work so that they’re forced to accept lower wages. You can see Powell’s FOMC transcripts from late last year for many examples of this.

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

#319

Post by FireBeyond »

alexpotato wrote: post #262
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…

Going to add a slightly devil's advocate view here. I used to be the conference directory for a college club sport (specifically, paintball). Part of my job was to find paintball fields to host college events. It's important at to say that the organization that funded these events was 501(c)(3) aka "non-profit" and we therefore were trying to minimize costs. Something we ran into was this scenario: - Fields knew we w…

> It's important at to say that the organization that funded these events was 501(c)(3) aka "non-profit" and we therefore were trying to minimize costs.

Were they actually a charitable organization, or a non-profit? Because those are not the same.

The Firefighters Association at my fire department held a 501(c)(3) for years, but were not inherently meant to be (because although we didn't solicit outside donations, and did do community service/donations, we also used association funds to do things like member events).

Quoth the IRS, Publication 557:

Purposes deemed to be eligible: - Religious

- Charitable

- Scientific

- Testing for public safety

- Literary

- Educational

- Fostering of national or international amateur sports, and

- Prevention of cruelty to animals and children

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

#320

Post by ricardobeat »

ChuckNorris89 wrote: post #313
dahwolf wrote: post #311

Reporting from the Netherlands. I'm not an economist, but I just don't understand how the current policy has any chance of lowering inflation. Price increases here are in energy and groceries. In plenty of other things of course, but those are the two big ones hitting almost everybody severely. Most have already optimized their energy usage (some to the point of sitting in the cold) and optimized for more cost-effect…

>We have a labor shortage instead. Not from the Netherlands, but the labor shortage I see Austria is mostly companies still trying to pay 2020 wages rather than a lack of people motivated toi switch jobs/immigrate. Labor shortage here is just propaganda for "we can't find people willing to work at the salaries we want to pay". In similar fashion I have a constant Ferrari shortage because I can't seem to find these ca…

The minimum wage in the Netherlands rose over 20% since 2020, while in Austria it apparently hasn't moved. Though I have a hard time believing the "people don't want to work" theme, when the alternative is having no income at all?
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