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This is a bit like saying "rainfall doesn't cause flooding - rivers do". But yes, rainfall somewhere created the river. In an environment with too much money,

This is a bit like saying "rainfall doesn't cause flooding - rivers do". But yes, rainfall somewhere created the river. In an environment with too much money, of course corporations are going to have high profit margins! But those profits will also go back into the economy in the form of purchases or capital or hiring or etc. All of which will drive inflation. In an inflationary environment, the kind we haven't had for 40 years (when the report mysteriously ends), profits are always going to look good because you are buying inputs at a lower price level than you are selling the outputs for. And when there is so much money in the economy, you will be raising prices just to keep products on the shelves. And making input costs drop (because of the massive supply side economic interventions) will only leave more money in the economy. Consumer spending is already at an all-time high - we're at new price levels given the quantity of money and there's no pressure to start dropping prices. > The findings come as the Federal Reserve has hiked interest rates to their highest point in 20 years. The report casts serious doubt on the need for further interest rate hikes, and instead calls for stronger policies to rein in “corporate profiteering”. Instead of solving the fundamental problems, how about we play a never-ending game of whack-a-mole? Inflation was a solved problem 40 years. Prices are just a function of how much money is chasing after how many goods. It's always a money supply issue. But we did such a good job of fighting it for so long that we have an entire generation of economists and experts who have had an entire career without ever having to account for inflation.

s1artibartfast 3y ago
>And when there is so much money in the economy, you will be raising prices just to keep products on the shelves. This begs the question of what the production bottleneck is. The popular answer seems to be monopoly and cartel behavior, but what are the barriers to entry? Is it complexity? Regulation? I understand that someone cant easily spin up a serious Amazon competitor, but what about beef or a can of beans. You wouldn't think the barriers to competition would extend as broadly as the the data suggests
- legitster 3y ago
  THIS is good question. If diaper prices are too high, what's stopping a new company from starting up and scooping them? Corporations are not being greedy enough! I suspect that the answer is boring - the profitability of making a diaper right now is overstated. It's not possible to make a profit competing with Kirkland Signature at 18c a diaper. And any analysis about the sudden profitability of diaper making is hyperbolic accounting.
  - s1artibartfast 3y ago
    It could also have to do with opportunity cost in a high interest environment. Why risk $100m in a diaper factory to make 5%/yr when you can buy bonds at 5% with zero risk. Personally, I know I question the value of buying stock when my investment is at risk and I have to pay 40% on any gains.
  - mrguyorama 3y ago
    The actual answer is that if you started a company to make diapers, the current conglomerates in the space would pause stock buybacks with all their free cash flow and just dump product onto the market until you go broke. Go ahead, try to get a diaper on the shelf cheaper than Huggies right now. Keep in mind, those 18c diapers CostCo sells are made in the same factory as the name brand diapers, are required to be made to equal or better standards, and still make a profit for Costco, about a quarter of their total revenue. Kirkland products are the loss leaders and don't even lose! That's how insane the profit margins are for name brand companies. That's why the Lays potato chips are $7 right now, even though the potatoes are only a few cents more expensive, even though my friend from highschool who literally owns the potato farm IS NOT getting significantly more money, and making potato chips should be an insanely automated process, to the point that if they claim labor costs could account for the price increase, they are lying. When Huggies sells those exact same diapers in a different box for 6 extra cents each, what is that other than naked greed? Also brand loyalty is insanely sticky. The vast majority of people cannot afford to buy one box of every brand of diapers to try out which actually is better, cannot trust what the box says because American laws allow you to blatantly lie on the packaging and MAYBE see a small fine. So your average person is going to hold on for dear life to any product that actually "works", meaning you can literally extract the brand value for a couple years with zero repercussions.
StreetChief 3y ago
Trickle down economics?! I'm pretty sure that is debunked...

s1artibartfast 3y ago

>And when there is so much money in the economy, you will be raising prices just to keep products on the shelves. This begs the question of what the production bottleneck is. The popular answer seems to be monopoly and cartel behavior, but what are the barriers to entry? Is it complexity? Regulation? I understand that someone cant easily spin up a serious Amazon competitor, but what about beef or a can of beans. You wouldn't think the barriers to competition would extend as broadly as the the data suggests

legitster 3y ago
THIS is good question. If diaper prices are too high, what's stopping a new company from starting up and scooping them? Corporations are not being greedy enough! I suspect that the answer is boring - the profitability of making a diaper right now is overstated. It's not possible to make a profit competing with Kirkland Signature at 18c a diaper. And any analysis about the sudden profitability of diaper making is hyperbolic accounting.
- s1artibartfast 3y ago
  It could also have to do with opportunity cost in a high interest environment. Why risk $100m in a diaper factory to make 5%/yr when you can buy bonds at 5% with zero risk. Personally, I know I question the value of buying stock when my investment is at risk and I have to pay 40% on any gains.
- mrguyorama 3y ago
  The actual answer is that if you started a company to make diapers, the current conglomerates in the space would pause stock buybacks with all their free cash flow and just dump product onto the market until you go broke. Go ahead, try to get a diaper on the shelf cheaper than Huggies right now. Keep in mind, those 18c diapers CostCo sells are made in the same factory as the name brand diapers, are required to be made to equal or better standards, and still make a profit for Costco, about a quarter of their total revenue. Kirkland products are the loss leaders and don't even lose! That's how insane the profit margins are for name brand companies. That's why the Lays potato chips are $7 right now, even though the potatoes are only a few cents more expensive, even though my friend from highschool who literally owns the potato farm IS NOT getting significantly more money, and making potato chips should be an insanely automated process, to the point that if they claim labor costs could account for the price increase, they are lying. When Huggies sells those exact same diapers in a different box for 6 extra cents each, what is that other than naked greed? Also brand loyalty is insanely sticky. The vast majority of people cannot afford to buy one box of every brand of diapers to try out which actually is better, cannot trust what the box says because American laws allow you to blatantly lie on the packaging and MAYBE see a small fine. So your average person is going to hold on for dear life to any product that actually "works", meaning you can literally extract the brand value for a couple years with zero repercussions.

StreetChief 3y ago

Trickle down economics?! I'm pretty sure that is debunked...