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Fed should make clear that rising profit margins are spurring inflation

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Re: Fed should make clear that rising profit margins are spurring inflation

#11

Post by neilwilson »

Rising profit margins only occur in two situations.

- the firm asks for more money - people pay the price

That requires people with money prepared to pay the price and a lack of effective competition from other suppliers for that money.

Which this all shows is that firms mark up costs and try and get as much for their output as possible. What keeps prices down is that people can usually go elsewhere because there is excess capacity to supply. We lack supply capacity at present.

Inflation is therefore down to a lack of competition. The solution to that is to encourage more firms to start up, break up existing monopolies or forcibly create some.

Re: Fed should make clear that rising profit margins are spurring inflation

#12

Post by uMeanPpl »

gruez wrote: post #7
toomuchtodo wrote: post #4

Earlier quoted context omitted.

https://oversight.house.gov/news/press-releases/subcommittee... https://youtu.be/30_H33mS76Y https://www.epi.org/blog/corporate-profits-have-contributed-... https://www.npr.org/2022/02/13/1080494838/economist-explains...

> https://oversight.house.gov/news/press-releases/subcommittee... >Below are key findings from the staff analysis: > ... >Certain corporations are using the cover of inflation to raise prices excessively, resulting in record profits and profit margins. Is this a bad thing? The paragraph later goes list examples which were shipping, rental car, meat processing, and oil and gas. All of them experienced some supply/dema…

Yes best to have full shelves of stuff that’s too expensive to buy

Re: Fed should make clear that rising profit margins are spurring inflation

#13

Post by neilwilson »

rahimnathwani wrote: post #2

This is an opinion piece. It speculates about reasons why companies have increased prices faster than their input costs have risen: "The resulting resilience in demand has given companies the confidence to raise prices faster than costs. In addition, the power of storytelling has conditioned consumers to accept price rises. Imagine a story about a farmer who takes wheat to the windmill, where it is ground into flour,…

"Unless there's some bread cartel/oligopoly, a bread seller can't just increase prices"

They can. Where else are you going to go? Due to lockdown the excess supply capacity that allows everybody in aggregate to leave supplier A and go to supplier B isn't there. Supplier B can't supply everybody and people don't want to or can't go without. Therefore Supplier A will sell their output at whatever price they decide.

For competition to work the turnover curve on the price/sales volume graph has to be leptokurtic. It isn't at present. Price can be pushed way up before volume is affected.

Re: Fed should make clear that rising profit margins are spurring inflation

#14

Post by onphonenow »

How is ft posting something like this? Prices are going up from firms raising prices?

Uh, the price is going up because the demand is there at that price. I’m seeing this first hand - customers mad for being turned away and others mad at the price increases.

I wish govt would work on the supply side for once. I don’t need lower input prices - but less hassles around for example adding three out of state employees would be fantastic

Re: Fed should make clear that rising profit margins are spurring inflation

#15

Post by ericmcer »

rahimnathwani wrote: post #2

This is an opinion piece. It speculates about reasons why companies have increased prices faster than their input costs have risen: "The resulting resilience in demand has given companies the confidence to raise prices faster than costs. In addition, the power of storytelling has conditioned consumers to accept price rises. Imagine a story about a farmer who takes wheat to the windmill, where it is ground into flour,…

If the government dumps a shitload of cash on everyone and the demand for bread goes way up overnight then the bread seller would 100% raise his prices out of sync with the cost of wheat. The bread seller is either charitable or dumb if he doesn’t sell for whatever people are willing to pay.

Re: Fed should make clear that rising profit margins are spurring inflation

#16

Post by vinyl7 »

gruez wrote: post #5

>Wages have been rising but prices have been rising faster, so real wage growth is catastrophically negative. This is far removed from the 1970s-style wage price spiral; apart from the wage and price control debacle of Richard Nixon’s presidency, US real average earnings rose for much of the decade. I can't tell whether this is serious. If I'm reading this right, the author is saying that today's inflation has not be…

My personal boots-on-the-ground experience has been that I'm earning a little more than twice as much now as I was 10 years ago...but it sure doesn't feel that way. My buying power is pretty much the same.

Re: Fed should make clear that rising profit margins are spurring inflation

#17

Post by impossiblefork »

rahimnathwani wrote: post #2

This is an opinion piece. It speculates about reasons why companies have increased prices faster than their input costs have risen: "The resulting resilience in demand has given companies the confidence to raise prices faster than costs. In addition, the power of storytelling has conditioned consumers to accept price rises. Imagine a story about a farmer who takes wheat to the windmill, where it is ground into flour,…

Yes, but unless there is a bread cartel or oligopoly, the increased profit margins shouldn't have been possible, so the rising margins are proof in themselves.

That demand is inelastic in itself shouldn't necessarily allow price increases.

Re: Fed should make clear that rising profit margins are spurring inflation

#18

Post by [deleted] »

rahimnathwani wrote: post #2

This is an opinion piece. It speculates about reasons why companies have increased prices faster than their input costs have risen: "The resulting resilience in demand has given companies the confidence to raise prices faster than costs. In addition, the power of storytelling has conditioned consumers to accept price rises. Imagine a story about a farmer who takes wheat to the windmill, where it is ground into flour,…

[deleted]

Re: Fed should make clear that rising profit margins are spurring inflation

#20

Post by rhaway84773 »

rahimnathwani wrote: post #2

This is an opinion piece. It speculates about reasons why companies have increased prices faster than their input costs have risen: "The resulting resilience in demand has given companies the confidence to raise prices faster than costs. In addition, the power of storytelling has conditioned consumers to accept price rises. Imagine a story about a farmer who takes wheat to the windmill, where it is ground into flour,…

> Unless there's some bread cartel/oligopoly, a bread seller can't just increase prices and use a story to convince people it's unavoidable.

This is trivially provable false. Companies can charge inflated prices based on story and/or advertising. The entire existence of high end fashion, for example, owes its existence to this being true.

But even setting that aside, the primary driver of inflation, oil and gas prices, are set by a literal cartel. And what do you know, the companies in this industry are making record profits.

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