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Why is inflation so sticky? It could be corporate profits

216 points by gnicholas 4y ago

gnicholas 4y ago
> “We do have to think about pricing differently,” said Ms. Weber. “A cost shock, or bottlenecks can create an implicit agreement among firms that raise their prices, so they can expect others to act likewise.” Interesting theory. I've definitely seen some restaurant surcharges from COVID stick around even as they have fully opened.
- juve1996 4y ago
  This only works in an environment that's flush with cash. E.g. a decade long bull market with artificially low interest rates, 2018 tax cuts, and stimulus from covid. Was a perfect storm.
  - autoexec 4y ago
    It works fine as long as the money you lose from the people you price out amounts to less than the money you gain by overcharging others who can afford it. You don't need an environment flush with cash for that to happen, you just need enough people who are well off enough to pay, or (as we saw in the pandemic) desperate enough to go into debit in order to get what they want. There's likely a rather large segment of the population who can be pushed out of certain goods and services entirely while companies make record amounts of profit exploiting a smaller pool of wealthier folks. It's not as bad when it's limited to luxury goods, but it's shitty when the goods people have always been able to afford are suddenly out of their reach and it's a real problem when increasing segments of the population are priced out of things like healthy foods, PFAS free cookware, healthcare, or housing.
    - somewhereoutth 4y ago
      Exactly, and this is why wealth inequality is the biggest social-economic problem we have right now, leading to the rise of the far-right (interestingly, the far left seems quiet compared to the early 20th century - I suppose the 'defeat of communism' is fresher in everyone's minds than the defeat of fascism).
    - juve1996 4y ago
      > you just need enough people who are well off enough to pay, Which is what happens after a decade long bull market, tax cuts, low rates, and stimulus. More people had more money that didn't before and they wanted more things and they wanted them now. But you still need a critical mass of demand, which means a bigger portion of the population demanding goods. Which means you need a bigger population than the mega rich to explain the problem. There was always rich people - yet we never saw this problem until now.
silisili 4y ago
It's a likely theory. But economics teaches us when a player overcharges, others will step in to undercut and take all the market share. So, we're at a point where we need to admit that mantra isn't true in the modern age, or admit that we've done a terrible job at preventing effective monopolies/duopolies from forming.
- jfengel 4y ago
  That is what the first two weeks of economics teaches. The rest of the curriculum is about how wrong that is.
  - silisili 4y ago
    Perhaps you went to a better school than I did. I only did 101 and 102, but even then the professor always spoke in terms like we were some old village, probably to make things easier to understand. But obviously those analogies don't apply to the world today, mostly.
    - tiedieconderoga 4y ago
      The problem is that people aren't rational, and they don't have perfect information. So the history of finance and commerce has been a cat-and-mouse game where the cats find new ways to cheat people, and the mice try to recognize and prevent those schemes. One example: cartels. If an industry is dominated by a small number of large players, they can collude to set prices and stifle competition through regulatory capture, acquisitions, cornering supply chains, etc. It works like a monopoly, but no individual member is large enough to pursue as a monopoly. It falls apart with too many members, because the rewards for defecting are high.
      - 7speter 4y ago
        I didn’t take tooooo many econ classes but it sure seems like there are a lot of monopolies, oligopolies, and potential cartels these days.
Paul-Craft 4y ago
https://archive.is/8rNrM https://archive.is/8rNrM
zephyrus1985 4y ago
[flagged]
- argentinian 4y ago
  Good, they are following Argentina's politicians' recipe to the letter. Here in Argentina we even have politicians that affirm "Saying that printing money causes inflation it totally false" https://www.pagina12.com.ar/diario/economia/2-190369-2012-03-25.html https://www.pagina12.com.ar/diario/economia/2-190369-2012-03...
- autoexec 4y ago
  "government spending" does not cause companies who are making record profits to increase their prices. That's just greed. All the free money being printed hasn't stopped Americans from seeing utility disconnections, credit card balances, and bill delinquencies skyrocket. Evictions have also been rising in suburbia, but somehow we're supposed to think that all the price hikes on everything is because the American people just have too much money? That the government was wrong to provide disaster relief to people so they could keep a roof over their heads and food on the table when they weren't able to work?
  - throwaway5Am1k 4y ago
    >"government spending" does not cause companies who are making record profits to increase their prices. That's just greed. It absolutely does. If people have "extra" money (e.g. COVID payments), they can bid higher on limited resources (i.e. inflation). If there's more employed (i.e. government jobs), that's again, more people with more money, for limited resources (i.e. inflation). While I'm sure companies are taking advantage of the fact, they must also realise that there's more demand for their limited resources, which causes them to raise prices. These companies are making "record profits", but you also need to consider that the purchasing power of your dollar is being debased, and these companies are (at least partially) trying to keep up with inflation.
    - autoexec 4y ago
Paul-Craft 4y ago
Why is this a good explanation now, when 6 months ago it was being pooh-poohed? Take a look at the graphs in this article: https://www.politifact.com/article/2022/dec/10/what-do-high-corporate-profits-have-do-high-inflat/ https://www.politifact.com/article/2022/dec/10/what-do-high-... The graphs lay out a clear picture of rising corporate profit margins, meanwhile the text is saying to "Ignore the man behind the curtain." What's different today that the WSJ can run this piece today?
- gnicholas 4y ago
  Could be that price increases are remaining high, even as supply shocks have abated.
  - autoexec 4y ago
    Of course that's what happened. Once companies saw they could make money hand over fist charging higher prices why on earth would they ever lower them back down once the supply issues were gone? Instead they just made record profits while they shifted the blame from "It's not our fault! There are shortages!" to "It's not our fault! It's inflation!" Meanwhile they've suckered a bunch of folks into blaming inflation on the pathetic amount of government aid we gave people during the pandemic so that they didn't immediately lose their homes or starve to death while nobody could work. Now consumers are facing record amounts of debit, and evictions and utility disconnections for non-pay are rising and people still think the problem is that Americans just have too much free money.
- bugglebeetle 4y ago
  The Fed started blowing up banks in its attempt to crush worker wages because when you kill a 1,000,000 plus people, disable countless more, force a bunch of early retirements etc you have to jack up rates super high, super fast to overcome wage increases from the resulting labor shortage. People who read the WSJ work at and invest in banks and don’t like to lose their shirts. So, they’re conceding to a little internecine war among the ownership class in the hope that the financiers can squelch the corporate price fixers before the banking system implodes.
freitzkriesler2 4y ago
Our income are worth less and our food stuffs are being shipped abroad because there are certain countries willing to pay more than we are for it (cough china cough). An export ban would do wonders at lowering food prices but that would worsen the already bad trade deficiet. Don't expect any help from any one in this regard .
qeternity 4y ago
In the past 15 years we engaged in unprecedented fiscal and monetary stimulus, which saw US Govt debt triple to $30T and the Fed balance sheet increasing 8 fold to $9T. But yeah, I'm sure it's corporate profits.
- rhaway84773 4y ago
  And yet despite 15 years of stimulus we have had persistently low inflation for all except the last 2 years or so, the first half of which was very clearly driven by supply chain issues. It’s almost like even if stimulus has had an impact it’s not the only, or even the primary driver.
  - qeternity 4y ago
    Inflation is never linear, and tends to over/under shoot. Under normal circumstances, supply chain issues (otherwise known as supply reduction) results in demand being priced out of the market. But we didn’t do that. We gave stimmie checks, and gas cards, and increased unemployment benefits, and paused loan repayments. When there’s not enough of thing X it means some people won’t get thing X. Giving people money to make it “more affordable” just pushes price higher without increasing affordability (as the market still settles on a market clearing price).
    - arcticbull 4y ago
      Japan had the same monetary policy for the same period of time and saw zero inflation. It's not monetary policy. There's no reason to think that 15 years later some magical thing happened to flush all the pressure that had built up out of the pipes. It was due to a combination of fiscal stimulus, yes, to a degree - and also supply chain issues, a land war in Europe, shutdowns in China, and myriad other confounding factors. There's been a lot of perfect storms lately.
      - qeternity 4y ago
        Japan now has actual inflation and is going to be completely powerless to stop it.
wg0 4y ago
Basic issue isn't excess of money. Basic issue is shortage in supply. Demand hasn't skyrocketed magically. The world over production levels were lowered to almost zero for couple of years. Interest rate hikes have wreaked a havoc of their own.
- autoexec 4y ago
  > Basic issue is shortage in supply. What's the supply issue that's impacting normal grocery store items? Is there a ship full of peanut butter ground beef and breakfast cereal stuck in a canal somewhere? Why would we have a shortage of things like cheese and pasta? For a short time there were real issues with things like toilet paper, but even that has been resolved (unless you're in the EU maybe). What's driving shortages now?
  - andrekandre 4y ago
    > What's the supply issue that's impacting normal grocery store items? well, for eggs, just to take 1 example: bird flu * * https://www.nerdwallet.com/article/finance/why-are-eggs-so-expensive https://www.nerdwallet.com/article/finance/why-are-eggs-so-e...
    - autoexec 4y ago
      The largest egg producer in the country wasn't impacted by the bird flu at all, but they still jacked up their prices like crazy and pulled in a 718% increase in profit over last quarter because they thought people would bend over and accept it since they had that flu outbreak excuse. I'm not saying bird flu played zero role in the price increases seen in stores, many producers were legitimately impacted, but that doesn't mean that people, already suffering from high prices, weren't being taken advantage of at every opportunity because of simple avarice. "Cal-Maine Foods, the nation’s largest producer of eggs, reported this week that its revenues doubled and its profit surged by 718% in the last quarter as a nationwide egg shortage has sent prices soaring...Cal-Maine, which controls about 20% of the national egg market, reported a net income of $323.2 million, a seven-fold rise from the same quarter last year...The company has said that its egg production facilities have been spared the wrath of avian flu, the contagion that has forced farms to cull more than 58 million chickens and turkeys since the outbreak spread in early of last year." (https://nypost.com/2023/03/30/cal-maine-foods-profits-surge-718-amid-us-egg-shortage/ https://nypost.com/2023/03/30/cal-maine-foods-profits-surge-...)
brianjking 4y ago
It is 100% corporate profits, lol.
ageek123 4y ago
Isn’t this reversing cause and effect? Corporations are able to raise prices because consumers are willing to pay higher prices. Corporations always want to make as much profit as they can. If consumers can pay more, you get inflation.
- baryphonic 4y ago
  The phenomenon you describe has a name, "demand-pull inflation." It even has a Wikipedia page.[0] [0]https://en.m.wikipedia.org/wiki/Demand-pull_inflation https://en.m.wikipedia.org/wiki/Demand-pull_inflation
- mitthrowaway2 4y ago
  Competition should drive down prices even if consumers have deep pockets. This suggests that the US market has gotten less competitive. I wonder how much it has to do with ownership of competing firms by a few large index funds with concentrated voting power.
  - rossriley 4y ago
    Don't forget supply and demand works on the capital side of the equation too, higher inflation means shareholders push for higher profits in the same way that high inflation causes workers to push for higher wages. There's increasing supply of investments at higher rate of return, bond yields are close to 4% which means riskier investments need to pay more to compete.
    - mitthrowaway2 4y ago
      Absolutely. But for competitors to raise margins bilaterally requires cooperation, because each side can take market share by keeping prices low. I just wonder if the cooperation might come in the form of, say, one powerful shareholder of both competitors making calls to the boards of directors of both competing companies. Unexpected consequence of passive investing?
      - 4y ago
paxys 4y ago
Their argument is basically that while normally a company raising prices would mean that some of their customers move to a competitor, in today's environment there is an implicit agreement that every company will keep prices high. So are they saying that the free market is basically not a thing anymore because of covid, and no company wants to get an edge over its competitors by undercutting on price despite having record margins?
- rhacker 4y ago
  Technically does that mean the FTC can literally go after all the companies for collusive price fixing?
  - paxys 4y ago
    Well they are saying there is no collusion. Companies are all individually deciding to raise prices and not bringing them down.
  - klysm 4y ago
    Tacit collusion isn’t illegal
    - rhacker 4y ago
      It probably should be in the internet age. There is a huge cottage industry out there for fixing prices. I hope that the feds discover all the OTHER companies out there that are similar to RealPage.
      - klysm 4y ago
        Yeah especially with the advent of algorithmic pricing it's going to get a lot harder to regulate
- medion 4y ago
  Anecdotal, but it feels like there are less competitors. So…
eucryphia 4y ago
We haven’t squandered all the money printing fast enough.
frankreyes 4y ago
Because companies have to raise prices to the point of replacement. When selling something, that should cover the costs of production of the replacements in order to be able to sell it again. This means the current price has to account for the future costs adjusted to inflation. And this is when inflation gets exponential.
senectus1 4y ago
oh come on! Corp profits dont help, but they're about as consequential as wage increases. Its sticky because of the money printing done in the past, and still happening. They printed a TON of money, its devalued our $$$'s. This is the direct consequence.
- akra 4y ago
  Precisely. Inflation is not even - if it were it wouldn't be nearly as much of a concern. There are winners (e.g. corporate profits) and losers (e.g. workers on fixed salaries). Unfortunately some economic actors can protect themselves, even profit from inflation much easier than others. Inflation usually hits the poor the hardest. Given the same amount of real resources this is because other groups of society can take advantage of inflation to increase their share of the pie.
- jfabre 4y ago
  I honestly can't believe you're being downvoted when you have the most sensible answer here. The government here in Canada created MASSIVE supply of money out of thin air to keep up with the US and put almost 1/3 of the population on social welfare and everyone is pointing fingers to find who's the most greedy. It's the dumbest thing ever. https://www.youtube.com/watch?v=GJ4TTNeSUdQ https://www.youtube.com/watch?v=GJ4TTNeSUdQ
  - senectus1 4y ago
    The media seems to be doing its damnedest to push any theory that does not tie into the quantitive easing/money printing. Its fascinating to watch what i suspect is another bigger collapse (than the GFC) start, and NOBODY in the MSM is looking at the elephant in the room wearing a big loud hat that says "IT WAS ME".
klysm 4y ago
So tacit collusion?
seu 4y ago
Free market economists are followers of a cult full of animistic creatures, like the "Free Market" and "Inflation", which have their own volition and just choose to "stick around" or "fairly distribute goods", without the need for absolutely no human to many any decision at all. "This damned inflation is so sticky!" I imagine one of them complaining, while trying to wash it off their hands. "Yeah, if only Free Market could solve it," says the other, while praying the Corporate Profits to raise even more.
- yanderekko 4y ago
  >Free market economists are followers of a cult full of animistic creatures, like the "Free Market" and "Inflation", which have their own volition and just choose to "stick around" or "fairly distribute goods", without the need for absolutely no human to many any decision at all. If you can't find a narrative of how "human decisions" caused inflation in 2021-2022 you aren't trying very hard. I'd say that believing that there was an exogenous shock to greed during the pandemic is much more animistic than these explanations.
- proc0 4y ago
  Printing money to handout to people is not part of any free market theory I know about. Also buying banks with tax payer money to avoid their fall is also not part of any FREE market. When some business get saved but others are forced to close (for any reason), there is no free market. In fact those things are precisely the opposite of "free" and create an uneven playing field where big players have unfair advantages.
yipbub 4y ago
IIRC, this seems to imply companies are colluding. Does it even matter if it's tacit or explicit collusion? - Explicit collusion is hard to detect. Someone with interests (an exec with giant options and incentives), meets an Exec from another at dinner. They have a conversation. Who knows? - Implicit/Tacit collusion is easy. The execs know that they can defect (lower prices) as soon as they see the other party defect. Why would a potential competitor ever think arbitrary prices that could sink at any point would be a competitive advantage worth investing in?
solatic 4y ago
Where goods and services are not commodified, people are unwilling to pay switching costs ("so much is uncertain, why increase uncertainty when I don't need to?"), so long as price differences are not "too large". This implicitly puts a floor on prices as producers hold onto their customer bases and slowly raise prices on newcomers. Where goods and services are commodified, the commodities have largely (at least in the US) been captured by oligopolies that implicitly understand that they should keep prices high, no direct collusion required. New entrants to the commodified markets (who would produce the commodities at lower prices) are nowhere to be found, as markets are highly regulated with high barriers to entry. Break up the oligopolies and encourage entrepreneurship.
perryizgr8 4y ago
1. Government prints massive amount of money. 2. Money supply increases, money value drops, definition of inflation, basic economics. 3. Economists and journalists: Is <insert any random reason apart from money printing> causing inflation? Bs like this erodes public trust in experts and institutions, and we saw the results of that when people started resisting against covid vaccines. Eventually, public trust in US/FED/economists/journalists will drop to such a low level that USD will lose its value entirely.
- yazantapuz 4y ago
  Idk why they are downvoting you... but this inflation issue is chronic here in Argentina and the cause is the govt printing money like there is no tomorrow. And the govt officials, aligned media and the like, all blame the "price makers" (from big corp to small bussiness). Seeing articles like this here is like a dejavu.
mkl95 4y ago
In my area salaries vary wildly for similar positions at similar companies. And even worse, I have been in bizarre situations like being offered less than what I'm making for a higher level role, at much richer companies. Corporate greed is rampant.
politelemon 4y ago
In the UK there's a company called Virgin Media (broadband, TV, phone provider) which has been completely blatant about it. They recently informed all customers that going forward they will annually be increasing prices by RPI + 3.9%. https://www.virginmedia.com/mobile/annual-rpi-price-increase https://www.virginmedia.com/mobile/annual-rpi-price-increase https://www.ispreview.co.uk/index.php/2023/01/virgin-mobile-uk-confirm-price-hikes-for-broadband-tv-and-phone.html https://www.ispreview.co.uk/index.php/2023/01/virgin-mobile-...
- simonbarker87 4y ago
  Side note: if you are an O2 customer and a Virgin Media customer you can get your speed bumped up to the next tier for free
  - ace32229 4y ago
    [dead]
- psychphysic 4y ago
  I could understand something smaller like RPI+1.5% Ultimately I think the private sector pay has risen by about 4-5% annualised so maybe that's where they got that pricing. Companies always prefer to offer sales and discounts rather than lower prices. Same with antivirus companies who's model runs on let's hope they forgot renewal will be 10x the price! This all relies on consumers not switching accounts constantly to the cheaper good-enough good.
  - dannyw 4y ago
    rpi is 13%
- Already__Taken 4y ago
  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.
psychphysic 4y ago
It's a sad fact but prices will always remain sticky on the way down. Then again so do wages, while inflation was small and consistent it oiled that machine to keep from there being a big drop in purchasing power. But when inflation is in the double digits that all breaks down. It's also a clear reminder of how so much European utopian aspects (free healthcare, education etc) is run on pure goodwill. Just look at the strike action in the UK with Nurses having seen 15% pay cut (being forced to accept a 5% pay "rise" after much negotiation) and doctors have seen a 21-26% paycut. Education continues to collapse with tuition fees rising, universities opting for cheap to run, low value courses to pull in money and teachers striking continuously as work conditions go from awful to unbearable.
- piva00 4y ago
  > It's also a clear reminder of how so much European utopian aspects (free healthcare, education etc) is run on pure goodwill. Just look at the strike action in the UK with Nurses having seen 15% pay cut (being forced to accept a 5% pay "rise" after much negotiation) and doctors have seen a 21-26% paycut. It's not run on pure goodwill, it's run on taxes. Taxing corporations has been against the zeitgeist of neoliberalism running since the 80s, the Third Way of social-democracy embedded itself with the neoliberal bullshit in the 90s, it's not a coincidence that since then there's been a steady decline in public services in Europe overall. The absolutism of catering to business over the rest of society has eroded multiple layers of what holds a society together. Healthcare in the UK is just the latest and most visible stone to fall. Education and healthcare in Sweden has been slowly privatised since the early 2000s, with accompanying declining trends for quality of services (private schools are some of the worst performing, healthcare being public-private has made staff shortages worse), quality of employment (teachers are not so well paid, nurses either), and so on. The extreme search for efficiency is creating holes that aren't easily priced, side-effects are delayed by years to decades from implementation of policies, it slowly degrades society. Thatcher's "there is no such thing as society" and Reagan-economics bound us to this hellhole for the past 40 years, maybe some change is required for this bullshit to end.
  - gfdsgfsdgfs 4y ago
thedonkeycometh 4y ago
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WalterBright 4y ago
Inflation is caused by an increase in the supply of money relative to the value of goods and services they represent. It's simply the Law of Supply & Demand in action. Where did the extra money come from? The federal deficit creates the money to fund the deficit. The future deficits in Biden's budget will cause a lot more inflation. There's no such thing as a free lunch. We will all pay for those deficits.
- ShadowBanThis01 4y ago
  Over-simplified and not true when oligopolies run rampant. Higher interest rates have one squat, and that’s why. Yet no one is hammering the government on it. HUH.
  - WalterBright 4y ago
    > not true when oligopolies run rampant Oligopolies are not able to increase the money supply by charging higher prices, so they cannot create inflation.
    - ShadowBanThis01 4y ago
      So you're saying that the recent spate of price increases isn't inflation. Got it.
      - WalterBright 4y ago
        I did not say that. Read again what I wrote.
        ShadowBanThis01 4y ago
        I did. Corporations are charging higher prices, and downstream consumer prices are up across the board. Nobody has proven a relationship to the money supply. Quite to the contrary, the Fed's interest-rate hikes have been largely ineffectual. But you're welcome to step up...
simple-thoughts 4y ago
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.
- simonh 4y ago
  Right, the dynamic is that high prices are due largely to shortages. Increasing supply requires investment, so yes price controls would reduce profits, but at the cost of curtailing investment which will sustain shortages and high prices for longer. It's certainly not great that profits have spiked, a chunk of that will get skimmed off for sure, but profits also do stimulate investment. The government can help by adjusting tax rates and incentives, but the best way to do that here is by encouraging investment not penalising profits. We want that money going to the right places for sure, but the money is needed.
- thfuran 4y ago
  >Reviewing this article and comment section has convinced me that it is politically possible. How so?
  - simple-thoughts 4y ago
    If people believe that inflation is caused by companies raising prices, the obvious solution (if you accept the premise) is price controls.
    - thfuran 4y ago
      But obviousness and political feasibility are at best very loosely related.
biscottigelato 4y ago
Tesla cutting prices aggressively at the expense of both their own margins, but also of other automakers having their market share and revenue shrinking massively, puts this WSJ theory immediately to bed.
- edrxty 4y ago
  That would be cool except they're now raising prices https://www.reuters.com/business/autos-transportation/tesla-hikes-us-prices-second-time-two-weeks-2023-05-02/ https://www.reuters.com/business/autos-transportation/tesla-...
- danaris 4y ago
  "Sure, companies across many industries are raising prices despite record profits—but because this one company, which is known to be a bit of an outlier, with a CEO who has been demonstrating sharply increasing erratic behavior, is cutting prices, the whole idea is bullshit!"
z3t4 4y ago
Monopolies and cartels love inflation as they can increase the prices. One interesting thing is that when prices increase, the raw prices decrease. So if you are a middle man you will make huge profits. Demand drops as prices increase. But producers don't want to lower their production. We have a lot of automation in the production chain, so while building a new factory cost a lot, dropping production output from 100% to 90% will save very little money. Over-production causes prices to fall.
CTDOCodebases 4y ago
Why is it sticky? Because it isn't just a mathematical equation. Human psycology comes into play and people (those setting prices and those buying) begin to expect prices to increase. Inertial inflation is the term used to describe it.[0] [0] - https://en.wikipedia.org/wiki/Inertial_inflation https://en.wikipedia.org/wiki/Inertial_inflation
bearmode 4y ago
It's obviously corporate profits, and it's obviously always been corporate profits.
lvl102 4y ago
One example is car dealers. Sure, they can charge MSRP, but they will run out of cars pretty fast. And since they have no control over how much they are allotted by the manufactures, they’re effectively putting themselves at a significant disadvantage versus competition in their market. So the logical thing would be to match their competition and mark up. In an age where advertisement budget is key to survival for many companies, profitability could determine who gets ahead over the long run.
DrNosferatu 4y ago
No shit, Sherlock: In Portugal, for most of 2022 to this day, the price of 1L own/white brand of semi-skimmed milk (one of the most basic and essential staple foods) has been the exact same - to the cent - on all different supermarket chains (Lidl, Audi, Auchan, Jerónimo Martins, Intermarché, Sonae, Dia, etc.) operating here. And, it has risen in steady small increments at exactly the same time in all of them, multiple times. As in, price time evolution correlation = 1.0 If this is not price fixing, I don't know what it is. The regulators just whine and yawn. And obviously, MBA-types haven't read Numerical Recipes' chapters on random numbers ;)
- DrNosferatu 4y ago
  Right on the money: https://youtu.be/Bo2BxTcVp74 https://youtu.be/Bo2BxTcVp74 Mark Blyth is definitely one of the most clear-sighted economists of today.
  - DrNosferatu 4y ago
    Really? Why did someone downvote this very elucidative video? Update: My posts on this thread are getting downvoted a lot, and I'm just stating facts! It seems I'm hitting a nerve... :D
    - fknorangesite 4y ago
      Complaining about downvotes is a good way to earn more of them.
      - johnea 4y ago
        What a load of shit. Downvote yourself asshole...
- permo-w 4y ago
  are you sure that’s not just the result of public price controls on basic products?
pessus 4y ago
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.
- cjrp 4y ago
  How do companies raise money on the stock market without others speculating on their future value?
hello_computer 4y ago
Rest of the world has dollars lying around. Suddenly, several of their trading partners stop taking those dollars, throwing supply/demand for dollars out of whack. Execs would be foolish (and in breach of fiduciary duty) to not raise prices in such a scenario. After 78 years of pushing everyone around, it was bound to happen. Maybe transition from bully to neighbor, other countries will re-dollarize (it was a pain for them to de-dollarize in the first place), and things will come back into balance? https://www.bloomberg.com/news/articles/2023-04-18/de-dollarization-is-happening-at-a-stunning-pace-jen-says https://www.bloomberg.com/news/articles/2023-04-18/de-dollar...
jerome-jh 4y ago
It has been a long time I stopped reading news whose title uses some form of conditional. You should try, it saves a lot of time. OK I clicked though ;) just to notice the subtitle uses "might". Closed the tab.

216 points by gnicholas 4y ago

> “We do have to think about pricing differently,” said Ms. Weber. “A cost shock, or bottlenecks can create an implicit agreement among firms that raise their prices, so they can expect others to act likewise.” Interesting theory. I've definitely seen some restaurant surcharges from COVID stick around even as they have fully opened.

juve1996 4y ago
This only works in an environment that's flush with cash. E.g. a decade long bull market with artificially low interest rates, 2018 tax cuts, and stimulus from covid. Was a perfect storm.
- autoexec 4y ago
  It works fine as long as the money you lose from the people you price out amounts to less than the money you gain by overcharging others who can afford it. You don't need an environment flush with cash for that to happen, you just need enough people who are well off enough to pay, or (as we saw in the pandemic) desperate enough to go into debit in order to get what they want. There's likely a rather large segment of the population who can be pushed out of certain goods and services entirely while companies make record amounts of profit exploiting a smaller pool of wealthier folks. It's not as bad when it's limited to luxury goods, but it's shitty when the goods people have always been able to afford are suddenly out of their reach and it's a real problem when increasing segments of the population are priced out of things like healthy foods, PFAS free cookware, healthcare, or housing.
  - somewhereoutth 4y ago
    Exactly, and this is why wealth inequality is the biggest social-economic problem we have right now, leading to the rise of the far-right (interestingly, the far left seems quiet compared to the early 20th century - I suppose the 'defeat of communism' is fresher in everyone's minds than the defeat of fascism).
  - juve1996 4y ago
    > you just need enough people who are well off enough to pay, Which is what happens after a decade long bull market, tax cuts, low rates, and stimulus. More people had more money that didn't before and they wanted more things and they wanted them now. But you still need a critical mass of demand, which means a bigger portion of the population demanding goods. Which means you need a bigger population than the mega rich to explain the problem. There was always rich people - yet we never saw this problem until now.

silisili 4y ago

It's a likely theory. But economics teaches us when a player overcharges, others will step in to undercut and take all the market share. So, we're at a point where we need to admit that mantra isn't true in the modern age, or admit that we've done a terrible job at preventing effective monopolies/duopolies from forming.

jfengel 4y ago
That is what the first two weeks of economics teaches. The rest of the curriculum is about how wrong that is.
- silisili 4y ago
  Perhaps you went to a better school than I did. I only did 101 and 102, but even then the professor always spoke in terms like we were some old village, probably to make things easier to understand. But obviously those analogies don't apply to the world today, mostly.
  - tiedieconderoga 4y ago
    The problem is that people aren't rational, and they don't have perfect information. So the history of finance and commerce has been a cat-and-mouse game where the cats find new ways to cheat people, and the mice try to recognize and prevent those schemes. One example: cartels. If an industry is dominated by a small number of large players, they can collude to set prices and stifle competition through regulatory capture, acquisitions, cornering supply chains, etc. It works like a monopoly, but no individual member is large enough to pursue as a monopoly. It falls apart with too many members, because the rewards for defecting are high.
    - 7speter 4y ago
      I didn’t take tooooo many econ classes but it sure seems like there are a lot of monopolies, oligopolies, and potential cartels these days.

Paul-Craft 4y ago

https://archive.is/8rNrM https://archive.is/8rNrM

zephyrus1985 4y ago

[flagged]

argentinian 4y ago
Good, they are following Argentina's politicians' recipe to the letter. Here in Argentina we even have politicians that affirm "Saying that printing money causes inflation it totally false" https://www.pagina12.com.ar/diario/economia/2-190369-2012-03-25.html https://www.pagina12.com.ar/diario/economia/2-190369-2012-03...
autoexec 4y ago
"government spending" does not cause companies who are making record profits to increase their prices. That's just greed. All the free money being printed hasn't stopped Americans from seeing utility disconnections, credit card balances, and bill delinquencies skyrocket. Evictions have also been rising in suburbia, but somehow we're supposed to think that all the price hikes on everything is because the American people just have too much money? That the government was wrong to provide disaster relief to people so they could keep a roof over their heads and food on the table when they weren't able to work?
- throwaway5Am1k 4y ago
  >"government spending" does not cause companies who are making record profits to increase their prices. That's just greed. It absolutely does. If people have "extra" money (e.g. COVID payments), they can bid higher on limited resources (i.e. inflation). If there's more employed (i.e. government jobs), that's again, more people with more money, for limited resources (i.e. inflation). While I'm sure companies are taking advantage of the fact, they must also realise that there's more demand for their limited resources, which causes them to raise prices. These companies are making "record profits", but you also need to consider that the purchasing power of your dollar is being debased, and these companies are (at least partially) trying to keep up with inflation.
  - autoexec 4y ago

Paul-Craft 4y ago

Why is this a good explanation now, when 6 months ago it was being pooh-poohed? Take a look at the graphs in this article: https://www.politifact.com/article/2022/dec/10/what-do-high-corporate-profits-have-do-high-inflat/ https://www.politifact.com/article/2022/dec/10/what-do-high-... The graphs lay out a clear picture of rising corporate profit margins, meanwhile the text is saying to "Ignore the man behind the curtain." What's different today that the WSJ can run this piece today?

gnicholas 4y ago
Could be that price increases are remaining high, even as supply shocks have abated.
- autoexec 4y ago
  Of course that's what happened. Once companies saw they could make money hand over fist charging higher prices why on earth would they ever lower them back down once the supply issues were gone? Instead they just made record profits while they shifted the blame from "It's not our fault! There are shortages!" to "It's not our fault! It's inflation!" Meanwhile they've suckered a bunch of folks into blaming inflation on the pathetic amount of government aid we gave people during the pandemic so that they didn't immediately lose their homes or starve to death while nobody could work. Now consumers are facing record amounts of debit, and evictions and utility disconnections for non-pay are rising and people still think the problem is that Americans just have too much free money.
bugglebeetle 4y ago
The Fed started blowing up banks in its attempt to crush worker wages because when you kill a 1,000,000 plus people, disable countless more, force a bunch of early retirements etc you have to jack up rates super high, super fast to overcome wage increases from the resulting labor shortage. People who read the WSJ work at and invest in banks and don’t like to lose their shirts. So, they’re conceding to a little internecine war among the ownership class in the hope that the financiers can squelch the corporate price fixers before the banking system implodes.

freitzkriesler2 4y ago

Our income are worth less and our food stuffs are being shipped abroad because there are certain countries willing to pay more than we are for it (cough china cough). An export ban would do wonders at lowering food prices but that would worsen the already bad trade deficiet. Don't expect any help from any one in this regard .

qeternity 4y ago

In the past 15 years we engaged in unprecedented fiscal and monetary stimulus, which saw US Govt debt triple to $30T and the Fed balance sheet increasing 8 fold to $9T. But yeah, I'm sure it's corporate profits.

rhaway84773 4y ago
And yet despite 15 years of stimulus we have had persistently low inflation for all except the last 2 years or so, the first half of which was very clearly driven by supply chain issues. It’s almost like even if stimulus has had an impact it’s not the only, or even the primary driver.
- qeternity 4y ago
  Inflation is never linear, and tends to over/under shoot. Under normal circumstances, supply chain issues (otherwise known as supply reduction) results in demand being priced out of the market. But we didn’t do that. We gave stimmie checks, and gas cards, and increased unemployment benefits, and paused loan repayments. When there’s not enough of thing X it means some people won’t get thing X. Giving people money to make it “more affordable” just pushes price higher without increasing affordability (as the market still settles on a market clearing price).
  - arcticbull 4y ago
    Japan had the same monetary policy for the same period of time and saw zero inflation. It's not monetary policy. There's no reason to think that 15 years later some magical thing happened to flush all the pressure that had built up out of the pipes. It was due to a combination of fiscal stimulus, yes, to a degree - and also supply chain issues, a land war in Europe, shutdowns in China, and myriad other confounding factors. There's been a lot of perfect storms lately.
    - qeternity 4y ago
      Japan now has actual inflation and is going to be completely powerless to stop it.

wg0 4y ago

Basic issue isn't excess of money. Basic issue is shortage in supply. Demand hasn't skyrocketed magically. The world over production levels were lowered to almost zero for couple of years. Interest rate hikes have wreaked a havoc of their own.

autoexec 4y ago
> Basic issue is shortage in supply. What's the supply issue that's impacting normal grocery store items? Is there a ship full of peanut butter ground beef and breakfast cereal stuck in a canal somewhere? Why would we have a shortage of things like cheese and pasta? For a short time there were real issues with things like toilet paper, but even that has been resolved (unless you're in the EU maybe). What's driving shortages now?
- andrekandre 4y ago
  > What's the supply issue that's impacting normal grocery store items? well, for eggs, just to take 1 example: bird flu * * https://www.nerdwallet.com/article/finance/why-are-eggs-so-expensive https://www.nerdwallet.com/article/finance/why-are-eggs-so-e...
  - autoexec 4y ago
    The largest egg producer in the country wasn't impacted by the bird flu at all, but they still jacked up their prices like crazy and pulled in a 718% increase in profit over last quarter because they thought people would bend over and accept it since they had that flu outbreak excuse. I'm not saying bird flu played zero role in the price increases seen in stores, many producers were legitimately impacted, but that doesn't mean that people, already suffering from high prices, weren't being taken advantage of at every opportunity because of simple avarice. "Cal-Maine Foods, the nation’s largest producer of eggs, reported this week that its revenues doubled and its profit surged by 718% in the last quarter as a nationwide egg shortage has sent prices soaring...Cal-Maine, which controls about 20% of the national egg market, reported a net income of $323.2 million, a seven-fold rise from the same quarter last year...The company has said that its egg production facilities have been spared the wrath of avian flu, the contagion that has forced farms to cull more than 58 million chickens and turkeys since the outbreak spread in early of last year." (https://nypost.com/2023/03/30/cal-maine-foods-profits-surge-718-amid-us-egg-shortage/ https://nypost.com/2023/03/30/cal-maine-foods-profits-surge-...)

brianjking 4y ago

It is 100% corporate profits, lol.

ageek123 4y ago

Isn’t this reversing cause and effect? Corporations are able to raise prices because consumers are willing to pay higher prices. Corporations always want to make as much profit as they can. If consumers can pay more, you get inflation.

baryphonic 4y ago
The phenomenon you describe has a name, "demand-pull inflation." It even has a Wikipedia page.[0] [0]https://en.m.wikipedia.org/wiki/Demand-pull_inflation https://en.m.wikipedia.org/wiki/Demand-pull_inflation
mitthrowaway2 4y ago
Competition should drive down prices even if consumers have deep pockets. This suggests that the US market has gotten less competitive. I wonder how much it has to do with ownership of competing firms by a few large index funds with concentrated voting power.
- rossriley 4y ago
  Don't forget supply and demand works on the capital side of the equation too, higher inflation means shareholders push for higher profits in the same way that high inflation causes workers to push for higher wages. There's increasing supply of investments at higher rate of return, bond yields are close to 4% which means riskier investments need to pay more to compete.
  - mitthrowaway2 4y ago
    Absolutely. But for competitors to raise margins bilaterally requires cooperation, because each side can take market share by keeping prices low. I just wonder if the cooperation might come in the form of, say, one powerful shareholder of both competitors making calls to the boards of directors of both competing companies. Unexpected consequence of passive investing?
    - 4y ago

paxys 4y ago

Their argument is basically that while normally a company raising prices would mean that some of their customers move to a competitor, in today's environment there is an implicit agreement that every company will keep prices high. So are they saying that the free market is basically not a thing anymore because of covid, and no company wants to get an edge over its competitors by undercutting on price despite having record margins?

rhacker 4y ago
Technically does that mean the FTC can literally go after all the companies for collusive price fixing?
- paxys 4y ago
  Well they are saying there is no collusion. Companies are all individually deciding to raise prices and not bringing them down.
- klysm 4y ago
  Tacit collusion isn’t illegal
  - rhacker 4y ago
    It probably should be in the internet age. There is a huge cottage industry out there for fixing prices. I hope that the feds discover all the OTHER companies out there that are similar to RealPage.
    - klysm 4y ago
      Yeah especially with the advent of algorithmic pricing it's going to get a lot harder to regulate
medion 4y ago
Anecdotal, but it feels like there are less competitors. So…

eucryphia 4y ago

We haven’t squandered all the money printing fast enough.

frankreyes 4y ago

Because companies have to raise prices to the point of replacement. When selling something, that should cover the costs of production of the replacements in order to be able to sell it again. This means the current price has to account for the future costs adjusted to inflation. And this is when inflation gets exponential.

senectus1 4y ago

oh come on! Corp profits dont help, but they're about as consequential as wage increases. Its sticky because of the money printing done in the past, and still happening. They printed a TON of money, its devalued our $$$'s. This is the direct consequence.

akra 4y ago
Precisely. Inflation is not even - if it were it wouldn't be nearly as much of a concern. There are winners (e.g. corporate profits) and losers (e.g. workers on fixed salaries). Unfortunately some economic actors can protect themselves, even profit from inflation much easier than others. Inflation usually hits the poor the hardest. Given the same amount of real resources this is because other groups of society can take advantage of inflation to increase their share of the pie.
jfabre 4y ago
I honestly can't believe you're being downvoted when you have the most sensible answer here. The government here in Canada created MASSIVE supply of money out of thin air to keep up with the US and put almost 1/3 of the population on social welfare and everyone is pointing fingers to find who's the most greedy. It's the dumbest thing ever. https://www.youtube.com/watch?v=GJ4TTNeSUdQ https://www.youtube.com/watch?v=GJ4TTNeSUdQ
- senectus1 4y ago
  The media seems to be doing its damnedest to push any theory that does not tie into the quantitive easing/money printing. Its fascinating to watch what i suspect is another bigger collapse (than the GFC) start, and NOBODY in the MSM is looking at the elephant in the room wearing a big loud hat that says "IT WAS ME".

klysm 4y ago

So tacit collusion?

seu 4y ago

Free market economists are followers of a cult full of animistic creatures, like the "Free Market" and "Inflation", which have their own volition and just choose to "stick around" or "fairly distribute goods", without the need for absolutely no human to many any decision at all. "This damned inflation is so sticky!" I imagine one of them complaining, while trying to wash it off their hands. "Yeah, if only Free Market could solve it," says the other, while praying the Corporate Profits to raise even more.

yanderekko 4y ago
>Free market economists are followers of a cult full of animistic creatures, like the "Free Market" and "Inflation", which have their own volition and just choose to "stick around" or "fairly distribute goods", without the need for absolutely no human to many any decision at all. If you can't find a narrative of how "human decisions" caused inflation in 2021-2022 you aren't trying very hard. I'd say that believing that there was an exogenous shock to greed during the pandemic is much more animistic than these explanations.
proc0 4y ago
Printing money to handout to people is not part of any free market theory I know about. Also buying banks with tax payer money to avoid their fall is also not part of any FREE market. When some business get saved but others are forced to close (for any reason), there is no free market. In fact those things are precisely the opposite of "free" and create an uneven playing field where big players have unfair advantages.

yipbub 4y ago

IIRC, this seems to imply companies are colluding. Does it even matter if it's tacit or explicit collusion? - Explicit collusion is hard to detect. Someone with interests (an exec with giant options and incentives), meets an Exec from another at dinner. They have a conversation. Who knows? - Implicit/Tacit collusion is easy. The execs know that they can defect (lower prices) as soon as they see the other party defect. Why would a potential competitor ever think arbitrary prices that could sink at any point would be a competitive advantage worth investing in?

solatic 4y ago

Where goods and services are not commodified, people are unwilling to pay switching costs ("so much is uncertain, why increase uncertainty when I don't need to?"), so long as price differences are not "too large". This implicitly puts a floor on prices as producers hold onto their customer bases and slowly raise prices on newcomers. Where goods and services are commodified, the commodities have largely (at least in the US) been captured by oligopolies that implicitly understand that they should keep prices high, no direct collusion required. New entrants to the commodified markets (who would produce the commodities at lower prices) are nowhere to be found, as markets are highly regulated with high barriers to entry. Break up the oligopolies and encourage entrepreneurship.

perryizgr8 4y ago

1. Government prints massive amount of money. 2. Money supply increases, money value drops, definition of inflation, basic economics. 3. Economists and journalists: Is <insert any random reason apart from money printing> causing inflation? Bs like this erodes public trust in experts and institutions, and we saw the results of that when people started resisting against covid vaccines. Eventually, public trust in US/FED/economists/journalists will drop to such a low level that USD will lose its value entirely.

yazantapuz 4y ago
Idk why they are downvoting you... but this inflation issue is chronic here in Argentina and the cause is the govt printing money like there is no tomorrow. And the govt officials, aligned media and the like, all blame the "price makers" (from big corp to small bussiness). Seeing articles like this here is like a dejavu.

mkl95 4y ago

In my area salaries vary wildly for similar positions at similar companies. And even worse, I have been in bizarre situations like being offered less than what I'm making for a higher level role, at much richer companies. Corporate greed is rampant.

politelemon 4y ago

In the UK there's a company called Virgin Media (broadband, TV, phone provider) which has been completely blatant about it. They recently informed all customers that going forward they will annually be increasing prices by RPI + 3.9%. https://www.virginmedia.com/mobile/annual-rpi-price-increase https://www.virginmedia.com/mobile/annual-rpi-price-increase https://www.ispreview.co.uk/index.php/2023/01/virgin-mobile-uk-confirm-price-hikes-for-broadband-tv-and-phone.html https://www.ispreview.co.uk/index.php/2023/01/virgin-mobile-...

simonbarker87 4y ago
Side note: if you are an O2 customer and a Virgin Media customer you can get your speed bumped up to the next tier for free
- ace32229 4y ago
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psychphysic 4y ago
I could understand something smaller like RPI+1.5% Ultimately I think the private sector pay has risen by about 4-5% annualised so maybe that's where they got that pricing. Companies always prefer to offer sales and discounts rather than lower prices. Same with antivirus companies who's model runs on let's hope they forgot renewal will be 10x the price! This all relies on consumers not switching accounts constantly to the cheaper good-enough good.
- dannyw 4y ago
  rpi is 13%
Already__Taken 4y ago
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.

psychphysic 4y ago

It's a sad fact but prices will always remain sticky on the way down. Then again so do wages, while inflation was small and consistent it oiled that machine to keep from there being a big drop in purchasing power. But when inflation is in the double digits that all breaks down. It's also a clear reminder of how so much European utopian aspects (free healthcare, education etc) is run on pure goodwill. Just look at the strike action in the UK with Nurses having seen 15% pay cut (being forced to accept a 5% pay "rise" after much negotiation) and doctors have seen a 21-26% paycut. Education continues to collapse with tuition fees rising, universities opting for cheap to run, low value courses to pull in money and teachers striking continuously as work conditions go from awful to unbearable.

piva00 4y ago
> It's also a clear reminder of how so much European utopian aspects (free healthcare, education etc) is run on pure goodwill. Just look at the strike action in the UK with Nurses having seen 15% pay cut (being forced to accept a 5% pay "rise" after much negotiation) and doctors have seen a 21-26% paycut. It's not run on pure goodwill, it's run on taxes. Taxing corporations has been against the zeitgeist of neoliberalism running since the 80s, the Third Way of social-democracy embedded itself with the neoliberal bullshit in the 90s, it's not a coincidence that since then there's been a steady decline in public services in Europe overall. The absolutism of catering to business over the rest of society has eroded multiple layers of what holds a society together. Healthcare in the UK is just the latest and most visible stone to fall. Education and healthcare in Sweden has been slowly privatised since the early 2000s, with accompanying declining trends for quality of services (private schools are some of the worst performing, healthcare being public-private has made staff shortages worse), quality of employment (teachers are not so well paid, nurses either), and so on. The extreme search for efficiency is creating holes that aren't easily priced, side-effects are delayed by years to decades from implementation of policies, it slowly degrades society. Thatcher's "there is no such thing as society" and Reagan-economics bound us to this hellhole for the past 40 years, maybe some change is required for this bullshit to end.
- gfdsgfsdgfs 4y ago

thedonkeycometh 4y ago

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WalterBright 4y ago

Inflation is caused by an increase in the supply of money relative to the value of goods and services they represent. It's simply the Law of Supply & Demand in action. Where did the extra money come from? The federal deficit creates the money to fund the deficit. The future deficits in Biden's budget will cause a lot more inflation. There's no such thing as a free lunch. We will all pay for those deficits.

ShadowBanThis01 4y ago
Over-simplified and not true when oligopolies run rampant. Higher interest rates have one squat, and that’s why. Yet no one is hammering the government on it. HUH.
- WalterBright 4y ago
  > not true when oligopolies run rampant Oligopolies are not able to increase the money supply by charging higher prices, so they cannot create inflation.
  - ShadowBanThis01 4y ago
    So you're saying that the recent spate of price increases isn't inflation. Got it.
    - WalterBright 4y ago
      I did not say that. Read again what I wrote.
      - ShadowBanThis01 4y ago
        I did. Corporations are charging higher prices, and downstream consumer prices are up across the board. Nobody has proven a relationship to the money supply. Quite to the contrary, the Fed's interest-rate hikes have been largely ineffectual. But you're welcome to step up...

simple-thoughts 4y ago

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.

simonh 4y ago
Right, the dynamic is that high prices are due largely to shortages. Increasing supply requires investment, so yes price controls would reduce profits, but at the cost of curtailing investment which will sustain shortages and high prices for longer. It's certainly not great that profits have spiked, a chunk of that will get skimmed off for sure, but profits also do stimulate investment. The government can help by adjusting tax rates and incentives, but the best way to do that here is by encouraging investment not penalising profits. We want that money going to the right places for sure, but the money is needed.
thfuran 4y ago
>Reviewing this article and comment section has convinced me that it is politically possible. How so?
- simple-thoughts 4y ago
  If people believe that inflation is caused by companies raising prices, the obvious solution (if you accept the premise) is price controls.
  - thfuran 4y ago
    But obviousness and political feasibility are at best very loosely related.

biscottigelato 4y ago

Tesla cutting prices aggressively at the expense of both their own margins, but also of other automakers having their market share and revenue shrinking massively, puts this WSJ theory immediately to bed.

edrxty 4y ago
That would be cool except they're now raising prices https://www.reuters.com/business/autos-transportation/tesla-hikes-us-prices-second-time-two-weeks-2023-05-02/ https://www.reuters.com/business/autos-transportation/tesla-...
danaris 4y ago
"Sure, companies across many industries are raising prices despite record profits—but because this one company, which is known to be a bit of an outlier, with a CEO who has been demonstrating sharply increasing erratic behavior, is cutting prices, the whole idea is bullshit!"

z3t4 4y ago

Monopolies and cartels love inflation as they can increase the prices. One interesting thing is that when prices increase, the raw prices decrease. So if you are a middle man you will make huge profits. Demand drops as prices increase. But producers don't want to lower their production. We have a lot of automation in the production chain, so while building a new factory cost a lot, dropping production output from 100% to 90% will save very little money. Over-production causes prices to fall.

CTDOCodebases 4y ago

Why is it sticky? Because it isn't just a mathematical equation. Human psycology comes into play and people (those setting prices and those buying) begin to expect prices to increase. Inertial inflation is the term used to describe it.[0] [0] - https://en.wikipedia.org/wiki/Inertial_inflation https://en.wikipedia.org/wiki/Inertial_inflation

bearmode 4y ago

It's obviously corporate profits, and it's obviously always been corporate profits.

lvl102 4y ago

One example is car dealers. Sure, they can charge MSRP, but they will run out of cars pretty fast. And since they have no control over how much they are allotted by the manufactures, they’re effectively putting themselves at a significant disadvantage versus competition in their market. So the logical thing would be to match their competition and mark up. In an age where advertisement budget is key to survival for many companies, profitability could determine who gets ahead over the long run.

DrNosferatu 4y ago

No shit, Sherlock: In Portugal, for most of 2022 to this day, the price of 1L own/white brand of semi-skimmed milk (one of the most basic and essential staple foods) has been the exact same - to the cent - on all different supermarket chains (Lidl, Audi, Auchan, Jerónimo Martins, Intermarché, Sonae, Dia, etc.) operating here. And, it has risen in steady small increments at exactly the same time in all of them, multiple times. As in, price time evolution correlation = 1.0 If this is not price fixing, I don't know what it is. The regulators just whine and yawn. And obviously, MBA-types haven't read Numerical Recipes' chapters on random numbers ;)

DrNosferatu 4y ago
Right on the money: https://youtu.be/Bo2BxTcVp74 https://youtu.be/Bo2BxTcVp74 Mark Blyth is definitely one of the most clear-sighted economists of today.
- DrNosferatu 4y ago
  Really? Why did someone downvote this very elucidative video? Update: My posts on this thread are getting downvoted a lot, and I'm just stating facts! It seems I'm hitting a nerve... :D
  - fknorangesite 4y ago
    Complaining about downvotes is a good way to earn more of them.
    - johnea 4y ago
      What a load of shit. Downvote yourself asshole...
permo-w 4y ago
are you sure that’s not just the result of public price controls on basic products?

pessus 4y ago

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.

cjrp 4y ago
How do companies raise money on the stock market without others speculating on their future value?

hello_computer 4y ago

Rest of the world has dollars lying around. Suddenly, several of their trading partners stop taking those dollars, throwing supply/demand for dollars out of whack. Execs would be foolish (and in breach of fiduciary duty) to not raise prices in such a scenario. After 78 years of pushing everyone around, it was bound to happen. Maybe transition from bully to neighbor, other countries will re-dollarize (it was a pain for them to de-dollarize in the first place), and things will come back into balance? https://www.bloomberg.com/news/articles/2023-04-18/de-dollarization-is-happening-at-a-stunning-pace-jen-says https://www.bloomberg.com/news/articles/2023-04-18/de-dollar...

jerome-jh 4y ago

It has been a long time I stopped reading news whose title uses some form of conditional. You should try, it saves a lot of time. OK I clicked though ;) just to notice the subtitle uses "might". Closed the tab.