5 ms·

> but if so, that should be a temporary effect Isn't that what we are seeing, that prices are starting to come down?

astrange 3y ago
Prices coming down actually isn't the opposite of inflation - the ideal is that they stop changing, which is "disinflation". Prices going down in a single sector is okay, especially a volatile market that's kind of used to it, but when it happens everywhere that's "deflation" and means you're in the middle of a serious economic crisis like 2008.
- didibus 3y ago
  It's more nuanced given the greedflation theory I believe. Traditionally, inflation is attributed to: increased production costs (like raw materials, labor, etc.), increased demand, and monetary factors. Greedflation instead says some of it is also attributed to: firms with significant market power increasing prices more than would be necessary to cover their increased costs. This kind of price increase is not driven by the usual market dynamics of supply and demand but rather by the strategic pricing decisions of dominant firms in less competitive markets. That means, as competition ramps up, or buyers start holding back expenses, prices will come down again, to what should have been the "real inflation" all along.
  - astrange 3y ago
    The issue with deflation is expectations. If there's expected inflation or deflation it's not too bad; purchases get pulled forward or delayed but people can still make plans for it. Unexpected inflation makes people unhappy because they have to increase spending on essentials, but they usually survive, and it's good for debtors because they get nominal wage increases which make nominal debts easier to pay off. But the opposite happens with unexpected deflation - it gets harder to pay off loans, which is bad if your business has loans and can kill it. So if a company got a profit hike, reinvested all of it, then had a deflation shock, they might go bankrupt. This is okay if it only happens to a few companies, but greedflation relies on some companies being extra important to customers, so that seems extra disruptive if they fail.
    - didibus 3y ago
      So if a company got a profit hike, reinvested all of it, then had a deflation shock, they might go bankrupt If they reinvested all of it, it wouldn't have counted as profit. The study points out at outsized increased profit.
      - astrange 3y ago
        That just means the issue moves to the shareholders.
        didibus 3y ago
        Your thesis doesn't really make sense to me. You're assuming someone that is making outsized profit this year, somehow is gambling all of that profit and their existing money in some risky bet that depends on the continuation of greedflation, and if that stopped and their price gouging were forced to come back down to normal level, they'd lose their bet, and somehow that would be so catastrophic that the biggest most depended on juggernauts would collapse into bankruptcy causing a country wide recession?

Prices coming down actually isn't the opposite of inflation - the ideal is that they stop changing, which is "disinflation". Prices going down in a single sector is okay, especially a volatile market that's kind of used to it, but when it happens everywhere that's "deflation" and means you're in the middle of a serious economic crisis like 2008.

didibus 3y ago
It's more nuanced given the greedflation theory I believe. Traditionally, inflation is attributed to: increased production costs (like raw materials, labor, etc.), increased demand, and monetary factors. Greedflation instead says some of it is also attributed to: firms with significant market power increasing prices more than would be necessary to cover their increased costs. This kind of price increase is not driven by the usual market dynamics of supply and demand but rather by the strategic pricing decisions of dominant firms in less competitive markets. That means, as competition ramps up, or buyers start holding back expenses, prices will come down again, to what should have been the "real inflation" all along.
- astrange 3y ago
  The issue with deflation is expectations. If there's expected inflation or deflation it's not too bad; purchases get pulled forward or delayed but people can still make plans for it. Unexpected inflation makes people unhappy because they have to increase spending on essentials, but they usually survive, and it's good for debtors because they get nominal wage increases which make nominal debts easier to pay off. But the opposite happens with unexpected deflation - it gets harder to pay off loans, which is bad if your business has loans and can kill it. So if a company got a profit hike, reinvested all of it, then had a deflation shock, they might go bankrupt. This is okay if it only happens to a few companies, but greedflation relies on some companies being extra important to customers, so that seems extra disruptive if they fail.
  - didibus 3y ago
    So if a company got a profit hike, reinvested all of it, then had a deflation shock, they might go bankrupt If they reinvested all of it, it wouldn't have counted as profit. The study points out at outsized increased profit.
    - astrange 3y ago
      That just means the issue moves to the shareholders.
      - didibus 3y ago
        Your thesis doesn't really make sense to me. You're assuming someone that is making outsized profit this year, somehow is gambling all of that profit and their existing money in some risky bet that depends on the continuation of greedflation, and if that stopped and their price gouging were forced to come back down to normal level, they'd lose their bet, and somehow that would be so catastrophic that the biggest most depended on juggernauts would collapse into bankruptcy causing a country wide recession?