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Deflationary spirals are scary, at least for a debt and consumption driven economy like ours. In theory supply and demand should force prices back down over ti

Deflationary spirals are scary, at least for a debt and consumption driven economy like ours. In theory supply and demand should force prices back down over time, but ongoing consolidation/monopolies/backdoor price fixing (RealPage, Amazon Marketplace) kinda broke the efficient market stuff. Trust bust before the economy busts?

piva00 3y ago
> In theory supply and demand should force prices back down over time, but ongoing consolidation/monopolies/backdoor price fixing (RealPage, Amazon Marketplace) kinda broke the efficient market stuff. One way this could happen is if salaries increased to match the new prices over time. The issue is that we are not seeing that happening, prices are increasing much faster than salaries, while corporate profits break records. The money is flowing upwards, at some point people will get very fed up with that...
- sokoloff 3y ago
  In any inflationary environment, corporate profits should be expected to regularly break records (in nominal terms) just like GDP should be expected to regularly break records.
  - piva00 3y ago
    Break nominal records, yes, not to break record margins.
    - sokoloff 3y ago
      Corporate profit margins are in the range which has been typical since the recovery from the 2007 GFC. https://www.gurufocus.com/economic_indicators/62/corporate-profit-margin-after-tax- https://www.gurufocus.com/economic_indicators/62/corporate-p... They're not currently breaking records and they jumped into this range during a period of notoriously low inflation (by historical and absolute measures).
- bryanlarsen 3y ago
  Salaries basically only increase 2 ways: job hopping and unions. The bottom 10% are doing a lot of job hopping these days.
  - dontlaugh 3y ago
    And everyone is doing a lot of union joining.
marcosdumay 3y ago
> In theory supply and demand should force prices back down over time I'd bet that the theory you are using doesn't care a bit if prices go down or salaries go up. I say that because no, no reasonable economic theory predicts prices go back down after a high inflation. That's because this is very obviously false. (Maybe a few go down, by a small bit. Certainly not on average.)

piva00 3y ago

> In theory supply and demand should force prices back down over time, but ongoing consolidation/monopolies/backdoor price fixing (RealPage, Amazon Marketplace) kinda broke the efficient market stuff. One way this could happen is if salaries increased to match the new prices over time. The issue is that we are not seeing that happening, prices are increasing much faster than salaries, while corporate profits break records. The money is flowing upwards, at some point people will get very fed up with that...

sokoloff 3y ago
In any inflationary environment, corporate profits should be expected to regularly break records (in nominal terms) just like GDP should be expected to regularly break records.
- piva00 3y ago
  Break nominal records, yes, not to break record margins.
  - sokoloff 3y ago
    Corporate profit margins are in the range which has been typical since the recovery from the 2007 GFC. https://www.gurufocus.com/economic_indicators/62/corporate-profit-margin-after-tax- https://www.gurufocus.com/economic_indicators/62/corporate-p... They're not currently breaking records and they jumped into this range during a period of notoriously low inflation (by historical and absolute measures).
bryanlarsen 3y ago
Salaries basically only increase 2 ways: job hopping and unions. The bottom 10% are doing a lot of job hopping these days.
- dontlaugh 3y ago
  And everyone is doing a lot of union joining.

marcosdumay 3y ago

> In theory supply and demand should force prices back down over time I'd bet that the theory you are using doesn't care a bit if prices go down or salaries go up. I say that because no, no reasonable economic theory predicts prices go back down after a high inflation. That's because this is very obviously false. (Maybe a few go down, by a small bit. Certainly not on average.)