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My favorite part of this whole thing is how many people are absolutely falling over themselves to say "there's no way companies took advantage of decades of con

by _uhtu 3y ago

My favorite part of this whole thing is how many people are absolutely falling over themselves to say "there's no way companies took advantage of decades of consolidation and the political narrative of free money leading to inflation to raise prices for more profit", meanwhile the companies themselves are bragging about raising prices just because they can. In their own earnings reports.

jfghi 3y ago
I thought mergers increased efficiency to better serve the customer. /s
- FollowingTheDao 3y ago
  They do! And they care about your "social issues" as well! /s
  - throwaway173738 3y ago
    That’s why we’ve worked so hard to eliminate waste! We’re always buying carbon offsets for a greener tomorrow!
- devonkim 3y ago
  The customer is the shareholders, silly Wait a second, tech stocks are down like crazy for most of us. Fat good that did for us all as employees. Clearly raising interest rates isn't the kind of silver bullet that economists hoped it'd be.
- gfdsgfsdgfs 3y ago
  Which mergers are you talking about that caused inflation more than comparable goods in other countries?
AndrewKemendo 3y ago
In my experience the vast majority of people have very few root values that they won’t betray for a little more pleasure or power. People very quickly adopt a “if you can’t beat them join them” attitude when facing resistance or throw their hands up and say “I’m just trying to live” or “that’s not my problem” when encountering a moral dilemma. So no wonder that when faced with a moral dilemma most people put themselves in the position to say “I can see myself doing that and wouldn’t want to feel judged for it, so I’ll defend the practice because maybe I’ll need to do that later.” I’m trying to figure out how to build the structure of society to promote the opposite of that - to make it trivially easy to say no to unethical behavior instead of just going along with the crowd. I’m coming up short with how to do that.
- sanp 3y ago
  I am not sure most people think that far ahead. I think a lot of it comes down identity. People start identifying with "free market capitalism / freedom" (whatever that is) and then you try to rationalize their thinking / support / actions around that.
- vinyl7 3y ago
  That used to be accomplished by the fear of a deity
- devonkim 3y ago
  Part of the problem is that most human beings are fairly wired through various selection criteria and conditioning to accept even maladaptive behaviors through mimetics. The people that seem to quickly go against societal rules for whatever reasons they may be tend to be viewed as "anti-social" and quickly judged harshly by at least roughly 40% of the population at large. After all, "criminal" behavior and "protest" is mostly distinguished in terms of defining the current social contract as not valid or inconsistent and how many people overall agree, not whether something is simply written down and codified.
  - AndrewKemendo 3y ago
    Concur completely. Having the capacity to differentiate or make an explicit distinction for why one set of actions is preferable over the other in any type of way that has a epistemological grounding, is not something the vast majority people have the time, patience, training, personality type, etc. to be able to do. So then we have a problem don’t we? Either the expectation is that some plurality of humans have the ability to coherently manage this kind of epistemological chain reasoning. Or it is untenable for that level of coherency to be able to drive functional assumptions that are generalizable across all human communities. And us, we’re back to where all moral philosophers have always gotten stuck, which is to say, we have no objective epistemological grounding for any particular type of moral reasoning chain - making every single, moral debate impossible to agree on generalized first principles. So how do you structure society in a way such that the default behaviors diffuse power and increase pro social responsibility, given the fact that the current social structures demonstrate infinite examples of anti-social behaviors leading to power and wealth. That is to say, how do you create a society where nobody even wants to be a millionaire because that level of relative over-consumption relative to others would just feel too bad.
bugglebeetle 3y ago
All the HN threads on this have people arguing from first principles about why this is impossible while all the CEOs are like, “LOL look at what we’re getting away with.” Textbook example of why business schools and economics are generally separate departments.
- pjc50 3y ago
  There are two "fixed views" that will come up here, regardless of evidence for or against: - hardcore monetarists who think that inflation is always and only a monetary phenomenon - hardcore Efficient Market Hypothesis believers who think that all markets are always perfectly efficient, so therefore all companies are always already charging profit-maximising prices (These come up every single time and are immune to evidence. Also a bunch of people are going to ignore the UK and Euro qualifiers of the OP article and talk about US inflation) Personally I'd like to offer a couple of extra lines of inquiry: labour market tightening due to COVID losses, and the impact of huge natural gas price spikes in Europe due to the war. See the IMF quote in OP: > "Rising corporate profits account for almost half the increase in Europe's inflation over the past two years as companies increased prices by more than spiking costs of imported energy. Now that workers are pushing for pay rises to recoup lost purchasing power" That presents a proposed mechanism for actual price changes ("menu reprinting" in economics jargon). Energy spike forces price rises -> once you're changing the prices, makes sense to change them by more than you need -> wages less elastic than consumer spending -> increased profits because prices have gone up faster than wage bills AND energy prices have now come down again.
  - bugglebeetle 3y ago
    …sure, but this is essentially the same thing as greedflation. An exogenous shock created the circumstances for a price increase, but instead of restabilizing relative to inputs, companies decided (arguably conspired) to set this as a new price floor. And because of a lack of government regulation around monopolies and collusion, are getting away with doing so.
andsoitis 3y ago
> meanwhile the companies themselves are bragging about raising prices just because they can. In their own earnings reports. What's a good example where a company is bragging about raising prices? Regardless of tone, increasing profits is what is demanded by shareholders and given that 61% of Americans own stocks, I don't see how you break out of that loop.
- rcme 3y ago
  You can’t raise prices in a vacuum. If the market has adequate competition, then raising prices will lead to a loss in sales as customers go to other businesses. With consolidation, which GP mentioned, there isn’t enough competition to keep prices down.
  - andsoitis 3y ago
    > With consolidation, which GP mentioned, there isn’t enough competition to keep prices down. What is a tractable solution?
    - snovv_crash 3y ago
      Antitrust breakups.
      - pc86 3y ago
        Coupled with making sure that (in appropriate industries) regulations are sufficient to allow new entrants. It's not necessarily bad if it costs hundreds of millions or billions to start a pharmaceutical research firm. It shouldn't cost half a million to start a bakery, for example.
  - gfdsgfsdgfs 3y ago
    Several commenters like yourself have commented on consolidation without giving a clear example. Which consolidations have happened that caused the inflation?
40yearoldman 3y ago
Here we go again. Another case is of if you say it enough it must be true. Meanwhile drive by a mall or go to a store. They are packed. Lines are ling and people are falling over them selfs to buy stuff. Cars. While recovering, are still hard to find. When dealerships have shortages they do massive markups. Lets are sold but huge profits per car. This price action is due to demand, bulls have to be paid. Yet you totally ignore the masses of money injected into the economy. Hell we still have areas in CA where eviction is still banned and people are just living rent free. There is just too much day to day evidence to consider your statement that gave zero examples as good faith arguments. Next up. Replies replies showing a one off case of profit as status quo.
- FollowingTheDao 3y ago
  There is a large amount of YOLO going on, and this is reflected in the higher amount of credit card delinquencies: https://fred.stlouisfed.org/series/DRCCLACBS https://fred.stlouisfed.org/series/DRCCLACBS Do not assume that because someone has expensive things that they also have a lot of cash and no debt. > When dealerships have shortages they do massive markups. Lets are sold but huge profits per car. If price increases are due to supply constraints profits should equalize, not increase (This is called price elasticity). People need cars and manufactures are taking advantage of that fact. The demand (actually absolute need) for a car make the price extremely inelastic.
  - 40yearoldman 3y ago
    You just tried to counterpoint with evidence that people are out spending more. You called it YOLOing.
    - FollowingTheDao 3y ago
      They are YOLOing with debt, not cash.
- _uhtu 3y ago
  Lemme get this straight, your counter to the point "companies are bragging about raising prices" is... I see a lot of people in my local mall?
gizmondo 3y ago
My favorite part is that MMT advocates (like the author) were arguing for years "we should borrow and spend like there is no tomorrow, deficits don't matter as long as inflation is low". And now when it's suddenly not low they are like "nah, we should not do anything about it, inflation will go down anyway somehow, it won't become embedded, trust me".
gfdsgfsdgfs 3y ago
Which supermarkets that you go to are consolidated? Walmart has a 20% market share in the US and Costco has 7%.
- addisonl 3y ago
  [flagged]
  - gfdsgfsdgfs 3y ago
    Did you read your own article? Kroger and Albertsons have not merged so "inflation" would not apply to this non existent merger. Even if they did merge their market would still be around 10-12% which is far from a monopoly.
    - enterprise_cog 3y ago
      Market share isn’t evenly distributed. Many areas are only served by a Walmart or Kroger. Local monopolies.
      - gfdsgfsdgfs 3y ago
        What percentage of areas are only served by Walmart or Kroger? Please give your citation. Name some of these "many areas".
        roflyear 3y ago
        This is not a hard thing to research: https://www.foodpolitics.com/2021/07/americas-food-monopolies-and-power-imbalances/#:~:text=Now%2C%20just%20four%20companies%20%E2%80%93%20Walmart,to%20the%20Environmental%20Working%20Group https://www.foodpolitics.com/2021/07/americas-food-monopolie....
        hgdfhgfdhgdf 3y ago
        That says 4 companies control 65% of the retail market. That is not a monopoly and there are many other grocers that consumers can shop at, like Amazon, Whole Foods, Safeway. Trader Joe's or the many other regional specialty ones.
NickM 3y ago
Okay, so let's set consolidation aside, since I agree that's a real problem in some sectors. took advantage of...the political narrative...to raise prices for more profit I genuinely don't understand why so many people think this matters. What do you think would have happened if companies had decided to raise prices without having an "excuse" like this? Prices aren't kept under control by consumer outrage; we all may be mad about food prices, but we all still have to eat anyway. Yes companies are bragging about being able to raise prices, but it's not "because they can", it's because there's a supply/demand mismatch. The cause of that mismatch is complicated and varies by market sector, but this isn't some case of like, they couldn't raise prices in the past because people would get too mad at them, but now they've finally figured out how to fool everyone into not getting mad. It's clearly a much more nuanced situation we're in, no?
- ksec 3y ago
  Over the 10+ years on HN the one thing I have learned is that vast majority of tech people simply have no idea how commodities works. I would have thought 2020 with Toilet Paper roll would teach them a much needed lesson, but other than the constantly repeated bullwhip effect it doesn't seems much have changed.
- danaris 3y ago
  > it's because there's a supply/demand mismatch. No, it's because demand for food is inelastic. Free market theory is useful for getting general ideas for how doing X or Y might affect the economy, but once you're talking about the actual economy made up of actual people, you need to forget it, because "free markets" that actually follow those simple rules directly are effectively nonexistent. In this case, you don't even have to go so far as to say the theory is wrong, because it lays out certain conditions for what can be considered a "free market", and elastic demand is one of those. > they couldn't raise prices in the past because people would get too mad at them They didn't raise prices before because they believed people would get too mad and they'd lose money. Due to a fairly complex combination of factors, that's no longer true. Some of those factors are the increased consolidation of nearly every part of our economy, meaning that there are vastly fewer players in a given sector that would have to defect in order for this to stick; the (relatively speaking) massive levels of political and economic turmoil the US (and the Western world more generally) has suffered over the past several years, leaving people much more numb to stuff like this, at least in the short term; and the number of people willing to sit there and justify their actions for any of a wide variety of reasons. (And yes; the supply shocks of the pandemic that actually justified raising prices are a major factor, and were clearly the trigger for this—the thing that either gave them the idea, or showed them that it might work.)

by _uhtu 3y ago

jfghi 3y ago

I thought mergers increased efficiency to better serve the customer. /s

FollowingTheDao 3y ago
They do! And they care about your "social issues" as well! /s
- throwaway173738 3y ago
  That’s why we’ve worked so hard to eliminate waste! We’re always buying carbon offsets for a greener tomorrow!
devonkim 3y ago
The customer is the shareholders, silly Wait a second, tech stocks are down like crazy for most of us. Fat good that did for us all as employees. Clearly raising interest rates isn't the kind of silver bullet that economists hoped it'd be.
gfdsgfsdgfs 3y ago
Which mergers are you talking about that caused inflation more than comparable goods in other countries?

AndrewKemendo 3y ago

In my experience the vast majority of people have very few root values that they won’t betray for a little more pleasure or power. People very quickly adopt a “if you can’t beat them join them” attitude when facing resistance or throw their hands up and say “I’m just trying to live” or “that’s not my problem” when encountering a moral dilemma. So no wonder that when faced with a moral dilemma most people put themselves in the position to say “I can see myself doing that and wouldn’t want to feel judged for it, so I’ll defend the practice because maybe I’ll need to do that later.” I’m trying to figure out how to build the structure of society to promote the opposite of that - to make it trivially easy to say no to unethical behavior instead of just going along with the crowd. I’m coming up short with how to do that.

sanp 3y ago
I am not sure most people think that far ahead. I think a lot of it comes down identity. People start identifying with "free market capitalism / freedom" (whatever that is) and then you try to rationalize their thinking / support / actions around that.
vinyl7 3y ago
That used to be accomplished by the fear of a deity
devonkim 3y ago
Part of the problem is that most human beings are fairly wired through various selection criteria and conditioning to accept even maladaptive behaviors through mimetics. The people that seem to quickly go against societal rules for whatever reasons they may be tend to be viewed as "anti-social" and quickly judged harshly by at least roughly 40% of the population at large. After all, "criminal" behavior and "protest" is mostly distinguished in terms of defining the current social contract as not valid or inconsistent and how many people overall agree, not whether something is simply written down and codified.
- AndrewKemendo 3y ago
  Concur completely. Having the capacity to differentiate or make an explicit distinction for why one set of actions is preferable over the other in any type of way that has a epistemological grounding, is not something the vast majority people have the time, patience, training, personality type, etc. to be able to do. So then we have a problem don’t we? Either the expectation is that some plurality of humans have the ability to coherently manage this kind of epistemological chain reasoning. Or it is untenable for that level of coherency to be able to drive functional assumptions that are generalizable across all human communities. And us, we’re back to where all moral philosophers have always gotten stuck, which is to say, we have no objective epistemological grounding for any particular type of moral reasoning chain - making every single, moral debate impossible to agree on generalized first principles. So how do you structure society in a way such that the default behaviors diffuse power and increase pro social responsibility, given the fact that the current social structures demonstrate infinite examples of anti-social behaviors leading to power and wealth. That is to say, how do you create a society where nobody even wants to be a millionaire because that level of relative over-consumption relative to others would just feel too bad.

bugglebeetle 3y ago

All the HN threads on this have people arguing from first principles about why this is impossible while all the CEOs are like, “LOL look at what we’re getting away with.” Textbook example of why business schools and economics are generally separate departments.

pjc50 3y ago
There are two "fixed views" that will come up here, regardless of evidence for or against: - hardcore monetarists who think that inflation is always and only a monetary phenomenon - hardcore Efficient Market Hypothesis believers who think that all markets are always perfectly efficient, so therefore all companies are always already charging profit-maximising prices (These come up every single time and are immune to evidence. Also a bunch of people are going to ignore the UK and Euro qualifiers of the OP article and talk about US inflation) Personally I'd like to offer a couple of extra lines of inquiry: labour market tightening due to COVID losses, and the impact of huge natural gas price spikes in Europe due to the war. See the IMF quote in OP: > "Rising corporate profits account for almost half the increase in Europe's inflation over the past two years as companies increased prices by more than spiking costs of imported energy. Now that workers are pushing for pay rises to recoup lost purchasing power" That presents a proposed mechanism for actual price changes ("menu reprinting" in economics jargon). Energy spike forces price rises -> once you're changing the prices, makes sense to change them by more than you need -> wages less elastic than consumer spending -> increased profits because prices have gone up faster than wage bills AND energy prices have now come down again.
- bugglebeetle 3y ago
  …sure, but this is essentially the same thing as greedflation. An exogenous shock created the circumstances for a price increase, but instead of restabilizing relative to inputs, companies decided (arguably conspired) to set this as a new price floor. And because of a lack of government regulation around monopolies and collusion, are getting away with doing so.

andsoitis 3y ago

> meanwhile the companies themselves are bragging about raising prices just because they can. In their own earnings reports. What's a good example where a company is bragging about raising prices? Regardless of tone, increasing profits is what is demanded by shareholders and given that 61% of Americans own stocks, I don't see how you break out of that loop.

rcme 3y ago
You can’t raise prices in a vacuum. If the market has adequate competition, then raising prices will lead to a loss in sales as customers go to other businesses. With consolidation, which GP mentioned, there isn’t enough competition to keep prices down.
- andsoitis 3y ago
  > With consolidation, which GP mentioned, there isn’t enough competition to keep prices down. What is a tractable solution?
  - snovv_crash 3y ago
    Antitrust breakups.
    - pc86 3y ago
      Coupled with making sure that (in appropriate industries) regulations are sufficient to allow new entrants. It's not necessarily bad if it costs hundreds of millions or billions to start a pharmaceutical research firm. It shouldn't cost half a million to start a bakery, for example.
- gfdsgfsdgfs 3y ago
  Several commenters like yourself have commented on consolidation without giving a clear example. Which consolidations have happened that caused the inflation?

40yearoldman 3y ago

Here we go again. Another case is of if you say it enough it must be true. Meanwhile drive by a mall or go to a store. They are packed. Lines are ling and people are falling over them selfs to buy stuff. Cars. While recovering, are still hard to find. When dealerships have shortages they do massive markups. Lets are sold but huge profits per car. This price action is due to demand, bulls have to be paid. Yet you totally ignore the masses of money injected into the economy. Hell we still have areas in CA where eviction is still banned and people are just living rent free. There is just too much day to day evidence to consider your statement that gave zero examples as good faith arguments. Next up. Replies replies showing a one off case of profit as status quo.

FollowingTheDao 3y ago
There is a large amount of YOLO going on, and this is reflected in the higher amount of credit card delinquencies: https://fred.stlouisfed.org/series/DRCCLACBS https://fred.stlouisfed.org/series/DRCCLACBS Do not assume that because someone has expensive things that they also have a lot of cash and no debt. > When dealerships have shortages they do massive markups. Lets are sold but huge profits per car. If price increases are due to supply constraints profits should equalize, not increase (This is called price elasticity). People need cars and manufactures are taking advantage of that fact. The demand (actually absolute need) for a car make the price extremely inelastic.
- 40yearoldman 3y ago
  You just tried to counterpoint with evidence that people are out spending more. You called it YOLOing.
  - FollowingTheDao 3y ago
    They are YOLOing with debt, not cash.
_uhtu 3y ago
Lemme get this straight, your counter to the point "companies are bragging about raising prices" is... I see a lot of people in my local mall?

gizmondo 3y ago

My favorite part is that MMT advocates (like the author) were arguing for years "we should borrow and spend like there is no tomorrow, deficits don't matter as long as inflation is low". And now when it's suddenly not low they are like "nah, we should not do anything about it, inflation will go down anyway somehow, it won't become embedded, trust me".

gfdsgfsdgfs 3y ago

Which supermarkets that you go to are consolidated? Walmart has a 20% market share in the US and Costco has 7%.

addisonl 3y ago
[flagged]
- gfdsgfsdgfs 3y ago
  Did you read your own article? Kroger and Albertsons have not merged so "inflation" would not apply to this non existent merger. Even if they did merge their market would still be around 10-12% which is far from a monopoly.
  - enterprise_cog 3y ago
    Market share isn’t evenly distributed. Many areas are only served by a Walmart or Kroger. Local monopolies.
    - gfdsgfsdgfs 3y ago
      What percentage of areas are only served by Walmart or Kroger? Please give your citation. Name some of these "many areas".
      - roflyear 3y ago
        This is not a hard thing to research: https://www.foodpolitics.com/2021/07/americas-food-monopolies-and-power-imbalances/#:~:text=Now%2C%20just%20four%20companies%20%E2%80%93%20Walmart,to%20the%20Environmental%20Working%20Group https://www.foodpolitics.com/2021/07/americas-food-monopolie....
        hgdfhgfdhgdf 3y ago
        That says 4 companies control 65% of the retail market. That is not a monopoly and there are many other grocers that consumers can shop at, like Amazon, Whole Foods, Safeway. Trader Joe's or the many other regional specialty ones.

NickM 3y ago

Okay, so let's set consolidation aside, since I agree that's a real problem in some sectors. took advantage of...the political narrative...to raise prices for more profit I genuinely don't understand why so many people think this matters. What do you think would have happened if companies had decided to raise prices without having an "excuse" like this? Prices aren't kept under control by consumer outrage; we all may be mad about food prices, but we all still have to eat anyway. Yes companies are bragging about being able to raise prices, but it's not "because they can", it's because there's a supply/demand mismatch. The cause of that mismatch is complicated and varies by market sector, but this isn't some case of like, they couldn't raise prices in the past because people would get too mad at them, but now they've finally figured out how to fool everyone into not getting mad. It's clearly a much more nuanced situation we're in, no?

ksec 3y ago
Over the 10+ years on HN the one thing I have learned is that vast majority of tech people simply have no idea how commodities works. I would have thought 2020 with Toilet Paper roll would teach them a much needed lesson, but other than the constantly repeated bullwhip effect it doesn't seems much have changed.
danaris 3y ago
> it's because there's a supply/demand mismatch. No, it's because demand for food is inelastic. Free market theory is useful for getting general ideas for how doing X or Y might affect the economy, but once you're talking about the actual economy made up of actual people, you need to forget it, because "free markets" that actually follow those simple rules directly are effectively nonexistent. In this case, you don't even have to go so far as to say the theory is wrong, because it lays out certain conditions for what can be considered a "free market", and elastic demand is one of those. > they couldn't raise prices in the past because people would get too mad at them They didn't raise prices before because they believed people would get too mad and they'd lose money. Due to a fairly complex combination of factors, that's no longer true. Some of those factors are the increased consolidation of nearly every part of our economy, meaning that there are vastly fewer players in a given sector that would have to defect in order for this to stick; the (relatively speaking) massive levels of political and economic turmoil the US (and the Western world more generally) has suffered over the past several years, leaving people much more numb to stuff like this, at least in the short term; and the number of people willing to sit there and justify their actions for any of a wide variety of reasons. (And yes; the supply shocks of the pandemic that actually justified raising prices are a major factor, and were clearly the trigger for this—the thing that either gave them the idea, or showed them that it might work.)