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Why is inflation so sticky? It could be corporate profits

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Re: Why is inflation so sticky? It could be corporate profits

#241

Post by refurb »

2000UltraDeluxe wrote: post #191
refurb wrote: post #158

Earlier quoted context omitted.

Supply chain - the materials that go into producing a good or getting the finished good to market. There were no supply issues during covid with many, many products. Yet those prices went up too, even in a country with a high level of competition. Why?

It's not about disruptions in the supply chain, but rather about controlling it and using it to extract maximum value for the shareholders. Everyone wants their share and nobody will accept a smaller percentage than they did last week. Consumers are caught in the middle, with rapidly increasing costs of living as a result. We as in "society"), have assumed this would be solved by some healthy competition. It's just t…

So wait, inflation isn't due to supply chain issues, but due to "extracting maximum value"?

So why was inflation only a problem last year? Did shareholders not try and extract maximum value before that?

Re: Why is inflation so sticky? It could be corporate profits

#242

Post by refurb »

shoubidouwah wrote: post #136
mjevans wrote: post #97

Earlier quoted context omitted.

Things I pay a lot for: * Rent (they're all high; and can't afford to buy anywhere near where I work) * Food (prices are pretty much the same everywhere) * Internet (Cable's the only modern-speed option where I currently rent) * Energy / Gas - either utilities or again, the same everywhere I think most everyone else is in the same boat. I can scale down some of these a little bit, but they're all fairly __inelastic__…

the rent, as always: https://en.wikipedia.org/wiki/Law_of_rent and the companies do not want to compete: most modern large companies only exist as a _vehicle for investment_, and as such compete for shareholders, not consumers. Due to this, short-termism dominates: average CEO stays 4 years at a given company, and performance of the company after they leave is largely uncorrelated with their carreer success, while sh…

Yet rents dropped by 20% during Covid in San Francisco. Seems like companies and landlords do compete on price.

Re: Why is inflation so sticky? It could be corporate profits

#243

Post by cjrp »

StingyJelly wrote: post #225
Already__Taken wrote: post #163

Earlier quoted context omitted.

and ee took CPI 10% + 3.5% profit. I don't know how that's legal when you look at how the CPI is calculated and it included these companies already. They're adding onto their own adjusted price inflation.

The effect an individual company would have on CPI is negligible. Besides, CPI strongly underestimates the actual devaluation of currency. You can look up local newspaper prices from 10 years ago and today and compare that to newspapers index that goes into the CPI calculation and I'm almost sure the price difference would be significantly larger compared to that skewed statistic.

It's not individual companies though; in fact I think every telco includes that same RPI + {X}% increase in their contracts.

Re: Why is inflation so sticky? It could be corporate profits

#244

Post by cjrp »

pessus wrote: post #204

Honestly we should pass a law that all investments are locked for 2 years. Stock market should be used for raising money not speculative thing it is now. wallstreet is forcing companies to show 20% yoy increase so companies will do anything to achieve that number as otherwise everyones money gets slashed by large percentage.

How do companies raise money on the stock market without others speculating on their future value?

Re: Why is inflation so sticky? It could be corporate profits

#245

Post by cjrp »

psychphysic wrote: post #238
piva00 wrote: post #124

Earlier quoted context omitted.

The NHS is bound to the UK's government economical policies, the main economical policy of the UK since Thatcher is neoliberalism (including Blair's Labour embracing The Third Way of social-democracy); the current Tory government has only been applying those principles ever more. The NHS as a concept is socialist, its implementation depends on taxes which depends on the UK's fiscal policy which in turn is neoliberali…

What doesn't make sense is that what keeps UK trained doctors working within the UK? It's goodwill. They could improve their lives immensely with a move to Australia, and New Zealand. If they are willing to do another round of exams on par with their finals they can go to Canada and the US. That's what it means when I say it's staffed by goodwill.

Some stay due to goodwill, but others are surely just inertia; selling your house, moving kids out of school, leaving friends and family behind, etc.

Re: Why is inflation so sticky? It could be corporate profits

#246

Post by rightbyte »

gfdsgfsdgfs wrote: post #121
pydry wrote: post #120

Earlier quoted context omitted.

Unless you tax land. Nobody manufactures that for profit but profit handsomely from it they do.

Taxing land would increase rent and therefore increase food prices.

Only if the renters can pay more rent?

Re: Why is inflation so sticky? It could be corporate profits

#247

Post by simple-thoughts »

thfuran wrote: post #235
simple-thoughts wrote: post #142

A few people have said that the response to inflation will be price controls eventually. Reviewing this article and comment section has convinced me that it is politically possible. Perhaps it’s a good time to remind people that inflation has happened many times in human history, as has price controls, and that the outcome will be shortages.

>Reviewing this article and comment section has convinced me that it is politically possible. How so?

If people believe that inflation is caused by companies raising prices, the obvious solution (if you accept the premise) is price controls.

Re: Why is inflation so sticky? It could be corporate profits

#248

Post by danaris »

0xy wrote: post #98
simiansays wrote: post #38

Earlier quoted context omitted.

Why not both? The modern dismantling of antitrust regulation and enforcement is a significant driver of both. It's gotten way worse now than ever, to the point where private equity firms like Vanguard and Blackrock can be the biggest shareholders in direct duopoly competitors (KO and PEP are an example), or where investors and producers are permitted to fully horizontally and vertically integrate (AMZN is an example)…

You cited Amazon's vertical integration as a reason they need to be broken up, however Amazon retail's margins vary between 0 and 5%. Walmart on the other hand is more like 25%. Amazon is the best middle man that customers could ever want. They clip the ticket an almost imperceptible amount. The stores you'd probably promote, small mom and pop stores, generally have 50%+ margins. Who exactly is gouging customers? It'…

> The stores you'd probably promote, small mom and pop stores, generally have 50%+ margins.

Let's assume this is true, along with your other margin numbers (I honestly have no idea one way or the other offhand).

Where does that money go?

It goes to Mom & Pop buying stuff at other stores in the area.

It goes to improving the small store (by paying contractors, vendors, and other people in the area).

It goes to Mom & Pop improving their house (by paying contractors in the area).

In short, it goes back into the community.

Where does Walmart's 25% go? At best, Bentonville, Arkansas. At worst the Waltons' offshore accounts.

Where does Amazon's 5% go? It gently gilds the top of Jeff Bezos' staggeringly and increasingly titanic fortune.

High margins, on their own, are not a bad thing that we should automatically seek to squash. They are one datapoint among many, and must be taken in context.

Re: Why is inflation so sticky? It could be corporate profits

#249

Post by shagie »

throwaway5Am1k wrote: post #48
shagie wrote: post #37

Earlier quoted context omitted.

So, between three years and two years ago I got a pre tax total of $2200 (some states had them as taxable income). How is that amount still causing inflation? You say "While I'm sure companies are taking advantage of the fact" - that's a present continuous tense... I used the past tense for when I last got a stimulus check. So why present continuous? Why not say "while I'm sure companies took advantage of the fact?"…

>How is that amount still causing inflation? I can't tell if this is a disingenuous question. Your $2200 is a very, very small amount of the total pie. Have a look at how the money supply changed during the pandemic. At the very start of the pandemic, when money was being printed there were experts saying "we will see inflation in the next 2 years", that's what we're seeing now. Here's a Deloitte paper published in 2…

I'm taking issue with "If people have "extra" money (e.g. COVID payments)" and that you're saying that this is now a very small amount of the total pie.

I additionally take issue with "If there's more employed (i.e. government jobs)" - and here's the total government jobs numbers: https://fred.stlouisfed.org/series/USGOVT and those numbers are lower than the value in January 2019.

And yes, we were going to have inflation. I believe it is fair to criticize the fed for not raising rates sooner.

> With the Fed’s main tool for stimulating the economy—interest rates—virtually useless right now, the problem becomes one of how to help the economy recover without it. But there is a solution. Under current conditions, fiscal policy— government deficit spending—is likely to be a very powerful tool for stimulating the economy. After all, with interest rates likely to stay at record lows, more federal borrowing is not going to affect investment spending by raising the cost of capital. That means that government spending financed by borrowing is likely to be particularly effective, since it won’t be offset by lower investment spending.

> The bottom line: To help cushion the crisis’s impact, the Fed has done its job and done it well. Now it’s up to the rest of the government to act to support the US economy.

And that's been weathered. So, the next question: why is inflation not responding well to the monetary policy?

In part, that appears to be that companies are locking in the higher prices (and increasing them) at a higher rate than inflation is growing while at the same time recording record profits on even lower sales.

That is the continuing part.

Let's look at the fewer jobs part. https://www.census.gov/library/stories/2022/12/net-internati... - you will note a substantial drop in the number of immigrants to the US.

Also https://www.cnbc.com/2023/01/30/long-covid-has-underapprecia... "About 18% of people with long Covid hadn’t returned to work for more than a year, according to a report by the New York State Insurance Fund, state’s largest workers’ compensation insurer."

So lets not blame government jobs for the tight labor market but rather a substantial decrease in the number of immigrants for the prior half decade and an estimated 4M US citizens that have left the labor market as part of long covid.

Re: Why is inflation so sticky? It could be corporate profits

#250

Post by sobkas »

HPsquared wrote: post #179
willis936 wrote: post #156

Earlier quoted context omitted.

I'm not familiar with the law of rent, but it does not seem accurate. Right now blue collar workers can't afford to rent within a 60 minute commute to Boston, where they are not paid a wage that justifies that commute. Why would you cook or clean in Boston when you could do it literally anywhere else in MA without the commute? I guess my point is that markets continually prove to not be rational. Maybe a philosopher…

In the case of the Boston cleaner, that seems to indicate the living costs can also drive salary. If nobody applies to work somewhere, the wages either go up or the job goes unfilled.

> In the case of the Boston cleaner, that seems to indicate the living costs can also drive salary. If nobody applies to work somewhere, the wages either go up or the job goes unfilled.

When one job salary doesn't cover living costs, you are more likely forced to have two or three, not a raise in your current one. It also solves problem of unfilled jobs. Because there are cases when job is only economically feasible if performed in urban area with high population density, so you can't really change your location.

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