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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

#421

Post by paphillips »

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…

One of my favorite economics professors called the second one 'OBSCENE PROFITS!'. His vocal delivery of those two words in front of the class was always highly animated and packed full of energy.

It is intuitive that, as soon as enterprising individuals catch wind of high profits being made somewhere, there will be an inrush of competitors looking to seize their share, which then continues until until some type of equilibrium is reached.

The fundamental breakdown in this type of efficient market mechanism is that it requires a reasonably level playing field: referees and rules. Complex systems without adequate regulation may result in local optima one or a few participants, who achieve regulatory capture, externalize costs, or achieve monopoly, oligopoly, or similar advantage to the disadvantage of all others. Regulation is required to achieve the global optimum for the wider group (i.e. society).

Cancer is an a example of a biological system exhibiting high growth with broken mechanisms of regulation. Similar outcomes can be observed when there is a disruption to a predator population, leading to an explosion of prey species, resulting in an ecosystem that is overrun and exhausted until balance returns.

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

#422

Post by mitchdoogle »

ETH_start wrote: post #410
pnt12 wrote: post #399

Earlier quoted context omitted.

But does it result in better quality of life? Maybe competitiveness is not the best target to optimize for.

Broadly speaking, competitiveness is the source of quality of life improvements, through its effect of expanding capital and thereby raising productivity.

In what world does competition increase quality of life? Competition results in more misery and less free time as people spend their time and energy trying to out compete one another.

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

#423

Post by 2devnull »

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…

It’s called wage compression. It’s thought to be a good thing. I don’t enjoy it very much.

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

#424

Post by paulmd »

evancox100 wrote: post #153
taude wrote: post #116

Earlier quoted context omitted.

Probably referring to news like this? https://www.nytimes.com/2023/04/28/business/wage-inflation-m...

Can't read the full article but the headline seems to say that the fed is hoping for wage increases to slow, but that would be because they have tightened monetary policy. That's different from the fed chair getting up and saying "Workers, please ask your boss to pay you less so we can fight inflation." Note that the main transmission mechanism of monetary policy in fighting inflation is basically putting people out…

"no, they're not expecting people to just take less money because wages are sticky and that wouldn't happen anyway, they're just trying to put everyone out of work so you have to renegotiate at your next job"

ok so you agree with the general thesis but not the exact mechanism? why quibble then?

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

#425

Post by kriops »

dpc050505 wrote: post #412
ETH_start wrote: post #410

Earlier quoted context omitted.

Broadly speaking, competitiveness is the source of quality of life improvements, through its effect of expanding capital and thereby raising productivity.

that's a cute hypothesis where's the proof

Your comment, for one. What device did you use to make it?

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

#426

Post by bumby »

ETH_start wrote: post #410
pnt12 wrote: post #399

Earlier quoted context omitted.

But does it result in better quality of life? Maybe competitiveness is not the best target to optimize for.

Broadly speaking, competitiveness is the source of quality of life improvements, through its effect of expanding capital and thereby raising productivity.

If economic productivity is proportional to quality of life, why aren't most people doing everything they possibly can to maximize their productivity. E.g., working 20 hour days, foregoing children in order to produce more, trading vacation days for more work...

I'd argue it's because economic productivity is not the only input into well-being and quality of life.

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

#427

Post by HDThoreaun »

clysm wrote: post #343
whimsicalism wrote: post #341

Earlier quoted context omitted.

Rewarding new entrants with high profit margins is a good way to get enough people to pool capital together to make it happen.

Show me how many new auto companies and farmers entered the market then to solve the supply and costing issues that we continue to have. The theory sounds great in an Econ 101 classroom, but is problematic in practice.

Chinese car manufacturers have become quite popular with their extremely cheap EV offerings. They're just banned in the US. Egg prices are back to normal after tripling last year.

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

#428

Post by lionelholt »

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 even deeper underlying structure for all of the world's problems is ... Human Overpopulation. Inequality increases with population due to fewer resources available per person. Democracy withers with the ever-growing population because more consumers, constituents, tax payers, soldiers, etc give more power to politicians, overpaid CEOs, etc. Name nearly any global issue and human overpopulation is at least a likely and usually primary factor.

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

#429

Post by nightski »

ClumsyPilot wrote: post #418
revelio wrote: post #387

Earlier quoted context omitted.

He labelled the cause as government policy, which clearly includes pandemic measures. Sweden didn't lock down but they did print a ton of money. Compare money supply growth for UK vs Sweden. It's the same and occurred at the same time. Lockdowns weren't the only pandemic spending measures unfortunately. All governments everywhere massively pumped the money supply to pay for "whatever it takes" and now the bill has co…

> In theory inflation cannot occur without money printing, because a rise in prices of something like oil or food must be compensated by a fall in prices elsewhere as demand for that less essential thing disappears. This is silly, inflation existed before "money printing" existed as a concept. We had inflation when we had gold standard. Inflation existed even when we used physical gold coins to pay. More plainly, the…

Agreed, it is silly to say inflation "only" occurs due to money printing. I'd like to point out though that gold is printed. More precisely it is mined.

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

#430

Post by the_gastropod »

horsawlarway wrote: post #420
the_gastropod wrote: post #338

Earlier quoted context omitted.

As a straight forward statement, it’s reductive malarkey. The Fed, in no way, prints money. When people use that phrase, it’s almost always a good sign they have no idea how money works.

No comment in this chain implied the fed printed money except yours. So lets cut the crap - you are engaging in reductive malarkey right now. It's a complete non-sequitur to the conversation at hand (that printing money causes inflation) and frankly, based on your comments - I'm fairly certain you have no clue what you're talking about at this point. Does the fed directly print money - no, the treasury does. Does the…

Again, you’re over-simplifying this. Money creation / destruction is not that simple. There are several ways the money supply can expand. Primarily, banks expand the money supply. The Fed (often) buys treasury bonds on an open exchange, allowing banks to make loans, expanding the money supply. Sometimes, the Fed “PRINTS MONEY!!” to decrease the money supply, by increasing the interest rate on reserve balances (IORB).

The Fed, obviously plays the central role in this. But I’d estimate, thanks to the wonderful past ~decade of anti-fiat crypto enthusiasm, the vast majority of “money printer” claims like we see up thread (by a user with a cryptocurrency-inspired username mind you) think the Fed literally just prints money, and that causes inflation.

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