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Inflation is happening because corporations are realizing that they can just keep raising prices and people will just... keep buying things. Rinse and repeat.
by whateverman23 3y ago
Inflation is happening because corporations are realizing that they can just keep raising prices and people will just... keep buying things. Rinse and repeat.
Record corporate profits are the key indicator here.
- d1sxeyes 3y agoTo be fair, although definitely some corporations are doing this, others are adapting to market circumstances caused by a few actors. For example, if you're a retailer selling pretty much anything now, your costs are up significantly across various different streams: your rent is up, your utilities bills are up, your logistics costs are up, the wholesale price of the products you stock is up... you have no choice but to increase your prices to stay afloat. That drives a spiral because now not only are your prices higher, you also have to raise your staff's wages because they can no longer afford to buy the products you sell, pushing you to increase your prices, and so on. Now, you are a contributor to inflation through no fault of your own, despite the key increases in cost coming from, ultimately, rising fuel costs impacting across the whole supply chain. I agree that record corporate profits are a key indicator (although probably this should be considered in context of inflation also, rather than just the raw dollar amounts).
- prepend 3y agoThe thing that usually keeps firms from raising prices is that customers don’t have money to pay the higher prices. What I think is novel now is that there’s a lot more cash available to pay these higher prices. Record profits are the result, not the cause.
- specialist 3y agoHousehold debt continues to rise. > What I think is novel now... Not novel. Just the return and normalization of usury. Here's a brief recap, beginning with South Dakota's Gov. Bill Janklow dismantling of consumer protections from financial predators in the late '70s: A Short History of Financial Deregulation in the United States [2009] https://www.cepr.net/documents/publications/dereg-timeline-2009-07.pdf https://www.cepr.net/documents/publications/dereg-timeline-2... (Just the first useful hit I found. There are many, many such analyses. The worsening financialization of household debt has continued almost uninterrupted.) Elsethread, u/Red_Leaves_Flyy notes some of the additional current co-factors. https://news.ycombinator.com/item?id=36237547 https://news.ycombinator.com/item?id=36237547
- jb12 3y agoAnd why do people have the capacity to just "keep buying things"?
- candiddevmike 3y agoThey don't, they're putting it on their credit cards: https://www.cbsnews.com/news/credit-card-debt-total-us-data-2023/ https://www.cbsnews.com/news/credit-card-debt-total-us-data-...
- johntiger1 3y agoBecause we keep printing money, cycle and repeat, ad nauseam
- dangoor 3y agoCredit? https://www.lendingtree.com/credit-cards/credit-card-debt-statistics/ https://www.lendingtree.com/credit-cards/credit-card-debt-st...
- Consultant32452 3y agoCredit availability is largely a function of federal reserve policy.
- neilwilson 3y agoNot at all. Credit availability is a function of creditworthiness of borrowers, which is largely a function of available collateral. All the Fed does is change the price. If I get charged more interest, I simply charge more in wages/profit to cover it. Which I can do because there is a tight labour market/product market.
- whateverman23 3y agoSaving less / taking money out of savings, more credit card debt (https://www.lendingtree.com/credit-cards/credit-card-debt-statistics/ https://www.lendingtree.com/credit-cards/credit-card-debt-st...), etc. Some things, people just have to buy. Can't stop buying food, paying rent, paying for your car, etc.
- golergka 3y agoWhy wouldn't other, competing corporations just... not raise prices and increase their market share?
- whateverman23 3y agoBecause they're all making record profits by all raising prices. Why stop the gravy train?
- golergka 3y agoTo make more money, of course. Increasing your sales from 12% of the market to 20% of the market by offering a burger (or whatever) for $4 of pure profit instead of competitor's $6 doesn't stop the gravy train.
- deleted 3y ago[deleted]
- rtkwe 3y agoOnly in idealized markets and even there where consumer demand is elastic. For inelastic products industries raising their prices in unison can all see greater profits because the changes in demand are outweighed by the increase in profits. So much of what we learn of markets are idealized games to make sense of extremely complex emergent systems made of people.
- HardlyCurious 3y agoFood is inelastic, but any one food item isn't. People can cut back on meat in difficult economic conditions, and they do. So, what is on one hand necessary and inelastic can also be a luxury. Even things called 'staples' are flexible, you won't die of malnutrition if you don't eat eggs.
- rtkwe 3y agoWithin the span of a few dollars for many items people will often eat the difference for familiarity and out of habit. I don't know about you but I rarely sit and comparison shop between similar options at the store I grab the thing I'm used to and expect to get because that's the habit and lowest friction.
- VirusNewbie 3y ago>Record corporate profits are the key indicator here. We have record GDP. We also have record amounts of M2. If there were NOT record amounts of profit i'd be considered. Looking at absolute profit not charted against other metrics is embarrassingly stupid. Maybe profits are driving inflation to some degree, but saying 'record corporate profits are a key indicator' is just wrong.
- rsync 3y ago"Record corporate profits are the key indicator here." I am open minded to the notion that corporate profits indicate the direction of "pain flows" in this economy dominated by inflation concerns. The first question I would ask is: are current corporate profits breaking records in real terms, or just nominal terms ? I don't know the answer to that. It would be disappointing, intellectually, to learn that corporate profits are simply up in absolute, nominal dollars ... ... but I've been disappointed before.
- techdmn 3y agoI would argue that this in turn is driven by a complete failure to enforce any of the anti-trust laws that are on the books.
- mitthrowaway2 3y agoIt's even possible for inflation to occur when people don't keep buying things, because inflation is measured in terms of price alone, not transaction volume, and not revenue (price x volume).
- andrewmutz 3y agoCorporations have always known they can raise prices. What's new is that people can pay them.
- HardlyCurious 3y agoWhat stopped corporations from realizing this before covid hit?
- than3 3y agoCorporations are people, they wait for either the leading or trailing edge and then pivot. Before we had demand-pull inflation due to constrained supply chains, we are now seeing cost-push inflation, and its not about the pandemic spending as much as the Fed left the money printer on for the past 10 years under QE. Chicken's come home to roost, and the pandemic happened after the Velocity of Money for the M2 had already dropped to nothing. Giving money to people and paying for their education was a last ditch effort after bank lending stopped in Oct/Nov 2019. The charts are all there for those that watch them.
- dv_dt 3y agoIt’s like a triggered phase change from a super heated or cooled state. Something triggers the start and the state shifts very quickly. In this case the Covid supply shock was the seed.
- Ekaros 3y agoThings were in steady state. The actual momentary supply and demand shock caused prices to naturally inflate. And when the supply returned they noted that prices didn't go down. Now they were free to test more increases.