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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 sq
by 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 agoThe 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 agoYou'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.