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Greedflation is the phenomenon whereby corporations increase their prices to chase higher profits, hoping that they can blame it on "inflation". This then inten

Greedflation is the phenomenon whereby corporations increase their prices to chase higher profits, hoping that they can blame it on "inflation". This then intensifies inflation. I think everyone--including people like Jerome Powell--agrees this is happening.

toomuchtodo 3y ago
> "If corporate profits were to decline from the extremely high levels that we saw recently, would it be possible to sustain" growth in workers' benefits "even as we get inflation down to the target of 2%?" Democratic Senator Chris Van Hollen asked Powell during the Fed chief's semi-annual testimony before the U.S. Senate Banking Committee. > While that might be difficult in the long run, "over the shorter term though, yes," Powell said, dipping tentatively into a debate that may become more pointed over time depending on how inflation, the job market and the economy evolve. https://www.reuters.com/markets/us/feds-powell-acknowledges-slimmer-corporate-profits-could-help-curb-inflation-2023-03-07/ https://www.reuters.com/markets/us/feds-powell-acknowledges-...
- octobus2021 3y ago
  In the same article: "Wages affect prices and prices affect wages," Powell said, associating current earnings growth to the current ultra-low unemployment rate of 3.4%, and suggesting the labor market may need to weaken at least somewhat for inflation to fall. meaning that in his opinion inflation is driven by high employment, aka people spending money like crazy because they have more money that they know what to do with, and the solution is to make sure more people are out of work and with less funds to spend. Perfectly logical solution to producer-driven inflation I guess.
  - toomuchtodo 3y ago
    https://www.cnbc.com/2023/04/21/why-economists-are-no-longer-so-worried-about-a-wage-price-spiral.html https://www.cnbc.com/2023/04/21/why-economists-are-no-longer... > The experts were worried about a so-called wage-price spiral. This occurs when workers expect inflation to keep rising, so demand — and achieve — higher salaries to keep up with price rises. Businesses then raise the prices of goods and services to cover higher labor costs, at the same time as workers have more disposable income to increase demand. This creates an inflationary loop, or in the language of economists, “second-round effects.” > But while concerns this time around aren’t totally gone, what’s being discussed more frequently now is the fact that a wage-price spiral has not occurred in the 18 months or so that inflation has been running red-hot in much of the world. > “What we’ve seen in the last year is prices rising very rapidly, but wages have not increased nearly as much, and that’s why we have a cost of living crisis,” Gourinchas said, after noting that core inflation remained high in many countries and in some cases was increasing. > “We should expect wages to catch up eventually and people’s real income to recover,” he said. Real income refers to wages adjusted for inflation, reflecting changes in purchasing power. > But the increase doesn’t present a risk because “the corporate sector has been sitting on pretty comfortable margins,” Gourinchas continued. Businesses’ revenues “have risen faster than costs, and so margins have room to absorb rising labor costs.” Tangentially, Powell cannot destroy aggregate demand via the benchmark rate in a way that materially impacts the unemployment rate due to structural demographics. ~2 million people over the age of 55 die every year in the US. ~3 million Baby Boomers retire every year. 55+ workers clinging to the participation rate is holding a lot of this together. https://www.barrons.com/articles/the-labor-market-bends-toward-scarcity-the-fed-cant-change-that-51670019273 https://www.barrons.com/articles/the-labor-market-bends-towa... https://seekingalpha.com/article/4531829-older-workers-propping-up-us-economy https://seekingalpha.com/article/4531829-older-workers-propp...
    - octobus2021 3y ago
      > “What we’ve seen in the last year is prices rising very rapidly, but wages have not increased nearly as much, and that’s why we have a cost of living crisis,” Gourinchas said, after noting that core inflation remained high in many countries and in some cases was increasing. EXACTLY. Wages driving inflation my behind. If anything, businesses increasing prices cause other businesses (that purchase their goods) to increase their own prices. While most businesses manage to keep wages low (and increasingly laying off more and more staff). How is increasing unemployment rate supposed to tame the inflation in this scenario????????
  - WalterBright 3y ago
    > "Wages affect prices and prices affect wages," Powell said Ah, the old wage-price spiral theory of inflation, which is total bunk because it doesn't explain the increase in the money supply. Inflation follows the increase in the money supply due to money creation by the Fed. It's in Powell's best interest to deny this.
    - erur 3y ago
      Agree that the spiral as a core reason is total BS but for both the US and Europe it goes beyond just increasing the money supply. Reducing the supply of goods/materials will have the same effect - even at a constant money supply. In Europe the ECB/EU gov is hiding behind the War in Ukraine and global supply chain issues to hide what is mostly their own pandemic purchasing program and overspending driving massive inflation. Then there's also their there's also sanctions, trade wars and over-regulation adding fuel to the fire. Of course none of these are a "natural effect from market dynamics" - as much as they'd love to make it sound like that.
WalterBright 3y ago
Companies and people have always been greedy. Here's the actual cause of inflation: https://www.federalbudgetinpictures.com/federal-spending-per-person-is-skyrocketing/ https://www.federalbudgetinpictures.com/federal-spending-per... This extra spending is paid for with inflation.
- medvezhenok 3y ago
  The "greediness" in normal times would get companies dragged in front of Congress. The inflation is a convenient foil for explaining price hikes. Federal spending certainly contributes to the problem, but is not the whole story.
  - WalterBright 3y ago
    The several trillions of deficit spending the government engaged in in the last couple years more than explains the inflation.
- majormajor 3y ago
  Not all spending is created equal. If you direct spending towards production it's much harder to have per-unit inflation since there are more goods available; instead, you get more total consumption. The classic "make the pie bigger." If you don't then yeah, you have more dollars chasing the same number of goods. So we need to be smarter overall in terms of how we look at allocation of money. It seems like the 2020 admin threw more money at the problem than was necessary, and did it in the second form, but it's probably still much better than having thrown too little at the problem would've been.
  - prottog 3y ago
    > the 2020 admin threw more money at the problem than was necessary, and did it in the second form Yes, the Covid stimulus was an experiment in "helicopter money", with a predictable response in price, especially in light of concurrent supply-chain issues. > it's probably still much better than having thrown too little at the problem would've been No, some interventions leave things worse off than it would have been without. When it comes to the public's money, and truly stupendous amounts of it at 25% of GDP, the bar has to be a lot higher than "eh, probably better". I suppose it's a job for economists and historians in the future to study this, but one wonders if there is some relationship between the amount of Covid stimulus response and the recent inflation, and how persistent it would be in the years to come.
WalterBright 3y ago
Here's why that doesn't work as an explanation. Suppose ham costs $50 and eggs cost $50. You have $100. Now Porky Pig gets greedy and raises the price of ham to $60. Now you have only $40 to spend on eggs, and (due to the Law of Supply & Demand) the price of eggs declines. I.e. this greediness does not put more money in peoples' pockets to pay for it. A general price increase is not possibly caused by greed. Inflation is a general increase, and requires an increase in the supply of money relative to the value of goods and services in the economy. And that way that happens is the government prints the extra money with no collateral. History is full of examples, including our current inflation.
- camgunz 3y ago
  Sure but Econ 101 is purely theoretical. De facto what happens is people sell their good car and buy a clunker, they forego vacations, they avoid new purchases, they buy shittier food, they eat out less, they pull their kids out of extracurriculars, they sell their houses, they move to cheaper cities, they go deeper into debt, they pick up extra shifts or extra jobs, etc. Essentially it's a huge transfer of wealth and economic power to those who need it least from those have very little to begin with. I honestly don't understand any of the arguments in favor of it. Like is Johnson & Johnson using the money to make better baby powder (that doesn't give you cancer) or are they pumping their stock price, collecting bonuses, and prepping for another round of share buybacks?
  - WalterBright 3y ago
    > they avoid new purchases Which causes price declines in those purchases. The Law of Supply & Demand.
    - camgunz 3y ago
      But it does continue to buoy the prices of things they do purchase. This round of inflation isn't uniform across all goods.
    - camgunz 3y ago
      For example: https://arstechnica.com/health/2023/05/share-of-americans-skipping-medical-care-due-to-money-woes-jumps-significantly/ https://arstechnica.com/health/2023/05/share-of-americans-sk...
WalterBright 3y ago
For my whole life, every time oil prices rose the media blamed it on "corporate greed". Every time they fell, there was silence.
- themedia 3y ago
  I consider that an unfair generalization. I know I blamed Middle Eastern conflict on many occasions.
  - WalterBright 3y ago
    That was blamed on corporate greed many times.
  - pseudalopex 3y ago
    Middle Eastern conflict. Natural disaster. OPEC. Demand.

toomuchtodo 3y ago

> "If corporate profits were to decline from the extremely high levels that we saw recently, would it be possible to sustain" growth in workers' benefits "even as we get inflation down to the target of 2%?" Democratic Senator Chris Van Hollen asked Powell during the Fed chief's semi-annual testimony before the U.S. Senate Banking Committee. > While that might be difficult in the long run, "over the shorter term though, yes," Powell said, dipping tentatively into a debate that may become more pointed over time depending on how inflation, the job market and the economy evolve. https://www.reuters.com/markets/us/feds-powell-acknowledges-slimmer-corporate-profits-could-help-curb-inflation-2023-03-07/ https://www.reuters.com/markets/us/feds-powell-acknowledges-...

octobus2021 3y ago
In the same article: "Wages affect prices and prices affect wages," Powell said, associating current earnings growth to the current ultra-low unemployment rate of 3.4%, and suggesting the labor market may need to weaken at least somewhat for inflation to fall. meaning that in his opinion inflation is driven by high employment, aka people spending money like crazy because they have more money that they know what to do with, and the solution is to make sure more people are out of work and with less funds to spend. Perfectly logical solution to producer-driven inflation I guess.
- toomuchtodo 3y ago
  https://www.cnbc.com/2023/04/21/why-economists-are-no-longer-so-worried-about-a-wage-price-spiral.html https://www.cnbc.com/2023/04/21/why-economists-are-no-longer... > The experts were worried about a so-called wage-price spiral. This occurs when workers expect inflation to keep rising, so demand — and achieve — higher salaries to keep up with price rises. Businesses then raise the prices of goods and services to cover higher labor costs, at the same time as workers have more disposable income to increase demand. This creates an inflationary loop, or in the language of economists, “second-round effects.” > But while concerns this time around aren’t totally gone, what’s being discussed more frequently now is the fact that a wage-price spiral has not occurred in the 18 months or so that inflation has been running red-hot in much of the world. > “What we’ve seen in the last year is prices rising very rapidly, but wages have not increased nearly as much, and that’s why we have a cost of living crisis,” Gourinchas said, after noting that core inflation remained high in many countries and in some cases was increasing. > “We should expect wages to catch up eventually and people’s real income to recover,” he said. Real income refers to wages adjusted for inflation, reflecting changes in purchasing power. > But the increase doesn’t present a risk because “the corporate sector has been sitting on pretty comfortable margins,” Gourinchas continued. Businesses’ revenues “have risen faster than costs, and so margins have room to absorb rising labor costs.” Tangentially, Powell cannot destroy aggregate demand via the benchmark rate in a way that materially impacts the unemployment rate due to structural demographics. ~2 million people over the age of 55 die every year in the US. ~3 million Baby Boomers retire every year. 55+ workers clinging to the participation rate is holding a lot of this together. https://www.barrons.com/articles/the-labor-market-bends-toward-scarcity-the-fed-cant-change-that-51670019273 https://www.barrons.com/articles/the-labor-market-bends-towa... https://seekingalpha.com/article/4531829-older-workers-propping-up-us-economy https://seekingalpha.com/article/4531829-older-workers-propp...
  - octobus2021 3y ago
    > “What we’ve seen in the last year is prices rising very rapidly, but wages have not increased nearly as much, and that’s why we have a cost of living crisis,” Gourinchas said, after noting that core inflation remained high in many countries and in some cases was increasing. EXACTLY. Wages driving inflation my behind. If anything, businesses increasing prices cause other businesses (that purchase their goods) to increase their own prices. While most businesses manage to keep wages low (and increasingly laying off more and more staff). How is increasing unemployment rate supposed to tame the inflation in this scenario????????
- WalterBright 3y ago
  > "Wages affect prices and prices affect wages," Powell said Ah, the old wage-price spiral theory of inflation, which is total bunk because it doesn't explain the increase in the money supply. Inflation follows the increase in the money supply due to money creation by the Fed. It's in Powell's best interest to deny this.
  - erur 3y ago
    Agree that the spiral as a core reason is total BS but for both the US and Europe it goes beyond just increasing the money supply. Reducing the supply of goods/materials will have the same effect - even at a constant money supply. In Europe the ECB/EU gov is hiding behind the War in Ukraine and global supply chain issues to hide what is mostly their own pandemic purchasing program and overspending driving massive inflation. Then there's also their there's also sanctions, trade wars and over-regulation adding fuel to the fire. Of course none of these are a "natural effect from market dynamics" - as much as they'd love to make it sound like that.

WalterBright 3y ago

Companies and people have always been greedy. Here's the actual cause of inflation: https://www.federalbudgetinpictures.com/federal-spending-per-person-is-skyrocketing/ https://www.federalbudgetinpictures.com/federal-spending-per... This extra spending is paid for with inflation.

medvezhenok 3y ago
The "greediness" in normal times would get companies dragged in front of Congress. The inflation is a convenient foil for explaining price hikes. Federal spending certainly contributes to the problem, but is not the whole story.
- WalterBright 3y ago
  The several trillions of deficit spending the government engaged in in the last couple years more than explains the inflation.
majormajor 3y ago
Not all spending is created equal. If you direct spending towards production it's much harder to have per-unit inflation since there are more goods available; instead, you get more total consumption. The classic "make the pie bigger." If you don't then yeah, you have more dollars chasing the same number of goods. So we need to be smarter overall in terms of how we look at allocation of money. It seems like the 2020 admin threw more money at the problem than was necessary, and did it in the second form, but it's probably still much better than having thrown too little at the problem would've been.
- prottog 3y ago
  > the 2020 admin threw more money at the problem than was necessary, and did it in the second form Yes, the Covid stimulus was an experiment in "helicopter money", with a predictable response in price, especially in light of concurrent supply-chain issues. > it's probably still much better than having thrown too little at the problem would've been No, some interventions leave things worse off than it would have been without. When it comes to the public's money, and truly stupendous amounts of it at 25% of GDP, the bar has to be a lot higher than "eh, probably better". I suppose it's a job for economists and historians in the future to study this, but one wonders if there is some relationship between the amount of Covid stimulus response and the recent inflation, and how persistent it would be in the years to come.

WalterBright 3y ago

Here's why that doesn't work as an explanation. Suppose ham costs $50 and eggs cost $50. You have $100. Now Porky Pig gets greedy and raises the price of ham to $60. Now you have only $40 to spend on eggs, and (due to the Law of Supply & Demand) the price of eggs declines. I.e. this greediness does not put more money in peoples' pockets to pay for it. A general price increase is not possibly caused by greed. Inflation is a general increase, and requires an increase in the supply of money relative to the value of goods and services in the economy. And that way that happens is the government prints the extra money with no collateral. History is full of examples, including our current inflation.

camgunz 3y ago
Sure but Econ 101 is purely theoretical. De facto what happens is people sell their good car and buy a clunker, they forego vacations, they avoid new purchases, they buy shittier food, they eat out less, they pull their kids out of extracurriculars, they sell their houses, they move to cheaper cities, they go deeper into debt, they pick up extra shifts or extra jobs, etc. Essentially it's a huge transfer of wealth and economic power to those who need it least from those have very little to begin with. I honestly don't understand any of the arguments in favor of it. Like is Johnson & Johnson using the money to make better baby powder (that doesn't give you cancer) or are they pumping their stock price, collecting bonuses, and prepping for another round of share buybacks?
- WalterBright 3y ago
  > they avoid new purchases Which causes price declines in those purchases. The Law of Supply & Demand.
  - camgunz 3y ago
    But it does continue to buoy the prices of things they do purchase. This round of inflation isn't uniform across all goods.
  - camgunz 3y ago
    For example: https://arstechnica.com/health/2023/05/share-of-americans-skipping-medical-care-due-to-money-woes-jumps-significantly/ https://arstechnica.com/health/2023/05/share-of-americans-sk...

WalterBright 3y ago

For my whole life, every time oil prices rose the media blamed it on "corporate greed". Every time they fell, there was silence.

themedia 3y ago
I consider that an unfair generalization. I know I blamed Middle Eastern conflict on many occasions.
- WalterBright 3y ago
  That was blamed on corporate greed many times.
- pseudalopex 3y ago
  Middle Eastern conflict. Natural disaster. OPEC. Demand.