5 ms·

Companies cynically used global crises for profits – and brought inflation

37 points by SirLJ 3y ago

akiselev 3y ago
https://archive.ph/ow1Rc https://archive.ph/ow1Rc
zx8080 3y ago
Just an observation. Inflation became significant in EU (namely Sweden) in early 2019 (one year before covid crisis). Transport rose 15% first days after Christmas, coffee 20%, tea 15%, fuel around 5-7%, etc. Covid logistic crisis did not make much difference for prices until some ship got stuck. Then immediately all main newspapers wrote that, due to that ship, people must brace for the prices going up. And they did go up! How was it in the US? Any significant change in prices one year before covid?
Natsu 3y ago
Inflation is caused by increases in the money supply or decreases in the amount of stuff you can buy with those little pieces of paper. Printing more little squares of paper, or adding numbers to a bank account, does not, and cannot, make more goods or services available for purchase. If you hold your prices the same, foolishly, all that happens is that people buy out your stock and you can't afford the cost to produce more goods, either in wages or raw materials or anything else. You have to help enable more productivity in order to get more stuff to buy. When businesses are shut down, even justifiably as they were with Covid, less stuff gets done, fewer raw materials are produced, etc. > In other words, during a period in which consumer demand largely cratered because people were staying home, businesses jacked up prices so far and so fast that they more than compensated for the decline in overall sales. And all costs were higher because nobody is producing stuff due to lots of shutdowns, shipping was disrupted so goods were simply not available, etc. This isn't even hard to understand, but articles like this exist because people want to allocate blame instead of looking at how to do better.
- marcosdumay 3y ago
  The article starts badly, but it gets into the real issue close to the end. Yes, inflation is always the government fault, and yes inflation and reducing sales volume both tend to come together with increased profit rates. But that part you quoted is there to explain that the size of that changes makes no sense, and concludes that the current price hikes are actually caused by market consolidation, not monetary inflation.
  - deleted 3y ago
    [deleted]
- QuarterReptile 3y ago
  You're leaving out a crucial piece that is seldom mentioned. Business as usual is safe and easy by comparison to guessing when a new variant or China shutdown or war is going to light off. Competition can lead to lean enterprises when things are predictable. When things are unpredictable, you bias for survival by keeping a little more reserve, and if you do it right, that hopefully shows up as extra profit when things end up smoothing back out. As an aside, the violence of the whiplash could be reduced in the absence of price gouging laws. If there's about to be a giant run on masks, it's a very good thing for the distribution and production of masks to see sudden infusions of cash from higher prices, even if their costs of doing business magically didn't increase. And all this without getting into the stimulative impacts of higher prices for other firms.
aeternum 3y ago
Capitalism has an answer for excess profits: competition. It works exceedingly well, better than anything else humans have invented to handle unexpected shortages and global supply chain issues. Governments should focus on ensuring that business environments are ripe for competition. Write laws that do not require large corporate legal teams to navigate. Thus far, we've failed on that front.
- hulitu 3y ago
  > Governments should focus on ensuring that business environments are ripe for competition. Apple, Google, Facebook, Microsoft, Shell, etc.
- Eddy_Viscosity2 3y ago
  Effective monopolies, like many found in the US (tech, banking, ISPs, energy, etc) are very profitable because of the market capture. Those profits are the real driver of capitalism, not competition. It is worthwhile for those companies to use those excess profits to 'lobby' government to pass/eliminate laws to ensure continued monopoly existence. This is the system we have - it guarantees eventual market capture and monopoly pricing.
  - aeternum 3y ago
    How would you change the system so that it avoids market capture?
    - Eddy_Viscosity2 3y ago
      One way would be to dis-incentivize companies/corporations from growing too big in the first place. By increasing tax rates based on company size, market share, market cap, etc and by applying more regulations and oversight particularly around dividends, options, and executive compensation such that being too big costs too much to be worth it.
      - aeternum 3y ago
drewcoo 3y ago
So Investopedia says inflation is "the decline of purchasing power over time": https://www.investopedia.com/terms/i/inflation.asp https://www.investopedia.com/terms/i/inflation.asp Now what could cause that, I wonder . . . (Note: It's not in any way cynical for profit-seeking companies to seek profits. So they un-cynically behave just like profit-seeking companies.)

37 points by SirLJ 3y ago

https://archive.ph/ow1Rc https://archive.ph/ow1Rc

Just an observation. Inflation became significant in EU (namely Sweden) in early 2019 (one year before covid crisis). Transport rose 15% first days after Christmas, coffee 20%, tea 15%, fuel around 5-7%, etc. Covid logistic crisis did not make much difference for prices until some ship got stuck. Then immediately all main newspapers wrote that, due to that ship, people must brace for the prices going up. And they did go up! How was it in the US? Any significant change in prices one year before covid?

Natsu 3y ago

Inflation is caused by increases in the money supply or decreases in the amount of stuff you can buy with those little pieces of paper. Printing more little squares of paper, or adding numbers to a bank account, does not, and cannot, make more goods or services available for purchase. If you hold your prices the same, foolishly, all that happens is that people buy out your stock and you can't afford the cost to produce more goods, either in wages or raw materials or anything else. You have to help enable more productivity in order to get more stuff to buy. When businesses are shut down, even justifiably as they were with Covid, less stuff gets done, fewer raw materials are produced, etc. > In other words, during a period in which consumer demand largely cratered because people were staying home, businesses jacked up prices so far and so fast that they more than compensated for the decline in overall sales. And all costs were higher because nobody is producing stuff due to lots of shutdowns, shipping was disrupted so goods were simply not available, etc. This isn't even hard to understand, but articles like this exist because people want to allocate blame instead of looking at how to do better.

marcosdumay 3y ago
The article starts badly, but it gets into the real issue close to the end. Yes, inflation is always the government fault, and yes inflation and reducing sales volume both tend to come together with increased profit rates. But that part you quoted is there to explain that the size of that changes makes no sense, and concludes that the current price hikes are actually caused by market consolidation, not monetary inflation.
- deleted 3y ago
  [deleted]
QuarterReptile 3y ago
You're leaving out a crucial piece that is seldom mentioned. Business as usual is safe and easy by comparison to guessing when a new variant or China shutdown or war is going to light off. Competition can lead to lean enterprises when things are predictable. When things are unpredictable, you bias for survival by keeping a little more reserve, and if you do it right, that hopefully shows up as extra profit when things end up smoothing back out. As an aside, the violence of the whiplash could be reduced in the absence of price gouging laws. If there's about to be a giant run on masks, it's a very good thing for the distribution and production of masks to see sudden infusions of cash from higher prices, even if their costs of doing business magically didn't increase. And all this without getting into the stimulative impacts of higher prices for other firms.

aeternum 3y ago

Capitalism has an answer for excess profits: competition. It works exceedingly well, better than anything else humans have invented to handle unexpected shortages and global supply chain issues. Governments should focus on ensuring that business environments are ripe for competition. Write laws that do not require large corporate legal teams to navigate. Thus far, we've failed on that front.

hulitu 3y ago
> Governments should focus on ensuring that business environments are ripe for competition. Apple, Google, Facebook, Microsoft, Shell, etc.
Eddy_Viscosity2 3y ago
Effective monopolies, like many found in the US (tech, banking, ISPs, energy, etc) are very profitable because of the market capture. Those profits are the real driver of capitalism, not competition. It is worthwhile for those companies to use those excess profits to 'lobby' government to pass/eliminate laws to ensure continued monopoly existence. This is the system we have - it guarantees eventual market capture and monopoly pricing.
- aeternum 3y ago
  How would you change the system so that it avoids market capture?
  - Eddy_Viscosity2 3y ago
    One way would be to dis-incentivize companies/corporations from growing too big in the first place. By increasing tax rates based on company size, market share, market cap, etc and by applying more regulations and oversight particularly around dividends, options, and executive compensation such that being too big costs too much to be worth it.
    - aeternum 3y ago

drewcoo 3y ago

So Investopedia says inflation is "the decline of purchasing power over time": https://www.investopedia.com/terms/i/inflation.asp https://www.investopedia.com/terms/i/inflation.asp Now what could cause that, I wonder . . . (Note: It's not in any way cynical for profit-seeking companies to seek profits. So they un-cynically behave just like profit-seeking companies.)