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
#2This 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, and then baked into bread. In that fantasy world, a rise in the cost of wheat of say 22 per cent might be used to justify a 15 per cent rise in the price of bread."
The argument is neither complete nor convincing. 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.
Re: Fed should make clear that rising profit margins are spurring inflation
#3Re: Fed should make clear that rising profit margins are spurring inflation
#4This 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,…
Re: Fed should make clear that rising profit margins are spurring inflation
#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 been associated with real wage growth, and is in contrast to the last bout of inflation (ie. the 1970s) which was associated with real wage growth. However, the author also adds "apart from the wage and price control debacle of Richard Nixon’s presidency". In other words, 1970s inflation was associated with wage growth, except the parts where it wasn't associated with wage growth. Well obviously if you hand wave away the data that don't fit your narrative of course you're going to find evidence that you want.
I browsed fred.stlouisfed.org to find some statistics[1][2] to independently evaluate the author's claim. The best I could come up with for wage growth was "Real Median Family Income in the United States". Looking at the two graphs[3], I can't really say the claim is true. It's true that real income ended the inflationary era of 70s/80s higher than it started, but there were also several dips (ie. the parts the author tried to hand wave away). Given that we're only less than a year into this inflationary ear, it seems premature to conclude This Time Is Different.
The only other piece of the data author presents is data from the hotel industry, but given how narrow it is it seems cherrypicked.
[1] https://fred.stlouisfed.org/series/MEFAINUSA672N
Re: Fed should make clear that rising profit margins are spurring inflation
#6It would be more accurate to state that consumer demand (as there is a bunch of excess savings sloshing around from Covid) is driving up market-clearing prices. Profit margins don't increase prices.
Re: Fed should make clear that rising profit margins are spurring inflation
#7This 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,…
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/demand imbalance (ie. too little supply or too much demand). In that sort of situation, isn't it better to let prices go up until supply meets demand, rather than leaving prices as it is? Sure, paying higher prices suck, but if demand outstrips supply you'll have shortages. During the pandemic we saw this happen with GPUs and game consoles, because OEMs were reluctant to hike prices and/or institute an auction system. They avoided a PR backlash from it and were able to channel the hate towards "scalpers", but the situation for the consumer wasn't really any better. I doubt consumers would want empty shelves at the butcher, for instance.
Re: Fed should make clear that rising profit margins are spurring inflation
#8No no no, it absolutely must be reckless shoppers spending so much money on necessities. They should be ashamed of themselves for buying food, toilet paper, and baby formula. Corporations are always innocent conveyors of value.
sigh
Re: Fed should make clear that rising profit margins are spurring inflation
#9Earlier 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…
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Re: Fed should make clear that rising profit margins are spurring inflation
#10No post body was provided.