3 ms·

You are mixing a lot of phenomena. In a high interest rate environment (caused by government money printed inflation) your profit margin has to be much higher t

You are mixing a lot of phenomena. In a high interest rate environment (caused by government money printed inflation) your profit margin has to be much higher than the risk-free rate of return to justify the investment, necessitating higher profits and cost cutting. RTO is a whole separate thing.

johnnyanmac 3y ago
>In a high interest rate environment (caused by government money printed inflation) your profit margin has to be much higher than the risk-free rate of return to justify the investment, groceries are pretty inelastic, they shouldn't be subject to "risk" unless people stop eating. That would be a much bigger issue (or miracle) than anything in economics if it happened. >RTO is a whole separate thing. it is indeed tangential. It was more just a small quip to note that company greed can get worse. Now just wait until the AI revolution next decade.
- ghufran_syed 3y ago
  yes, but the loan you took out to renovate the stores, buy new trucks, install new point of sale is risky to the lender, so it does change and increase the cost of providing those goods. Also, you say "pretty inelastic" - you seem to be accepting that food demand is elastic, just less so than other goods. Unsurprisingly, it turns out it depends what type of food article: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2804646/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2804646/
  - johnnyanmac 3y ago
    "large" grocers. I'm not cutting Ralph some slack over something they shoulda had setup years ago. >Also, you say "pretty inelastic" - you seem to be accepting that food demand is elastic, just less so than other goods. Sure, it's not as inelastic as gas for Americans. America has enough free/cheap ways to eat if it really really came down to it so they can't pull an insulin. Still, I'd put it pretty high. >Unsurprisingly, it turns out it depends what type of food articl I figured, but that would imply that premium or convinent food caused the price spikes. Maybe it did, but I'm not so confident given how and what the government subsidizes (another reason you can't just price hike goods willy nilly. Subsidies are so you can pass on low prices to customers, not so you can pocket more money).
mindslight 3y ago
USD hasn't been a high interest rate environment since the 80's. And it's wrong to assert a direct causality from government spending money to interest rates going up. Rather what happened is the existence of actual price inflation (through whatever combination of supply shortages, legislative/executive government spending, and algorithmic collusion) caused the Federal Reserve to have to pull up from their ZIRP autopilot corporate handout of the past several decades. For financial sustainability, we should all be pushing for the current moderate interest rates to be the new normal for the next several decades - enough time for 30 year mortgages and T-bills to mature, so asset prices correct. Since the Federal Reserve hasn't demonstrated any ability of self restraint, we should be supporting purposeful government spending on real investments which will prevent the Fed from dropping rates again. Furthermore it is much nicer for the economy at large when monetary creation (and thus price inflation) happens in deliberate areas needing strategic investment, instead of bubbles of whatever arbitrary asset class the bankers choose to run up each month.

johnnyanmac 3y ago

>In a high interest rate environment (caused by government money printed inflation) your profit margin has to be much higher than the risk-free rate of return to justify the investment, groceries are pretty inelastic, they shouldn't be subject to "risk" unless people stop eating. That would be a much bigger issue (or miracle) than anything in economics if it happened. >RTO is a whole separate thing. it is indeed tangential. It was more just a small quip to note that company greed can get worse. Now just wait until the AI revolution next decade.

ghufran_syed 3y ago
yes, but the loan you took out to renovate the stores, buy new trucks, install new point of sale is risky to the lender, so it does change and increase the cost of providing those goods. Also, you say "pretty inelastic" - you seem to be accepting that food demand is elastic, just less so than other goods. Unsurprisingly, it turns out it depends what type of food article: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2804646/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2804646/
- johnnyanmac 3y ago
  "large" grocers. I'm not cutting Ralph some slack over something they shoulda had setup years ago. >Also, you say "pretty inelastic" - you seem to be accepting that food demand is elastic, just less so than other goods. Sure, it's not as inelastic as gas for Americans. America has enough free/cheap ways to eat if it really really came down to it so they can't pull an insulin. Still, I'd put it pretty high. >Unsurprisingly, it turns out it depends what type of food articl I figured, but that would imply that premium or convinent food caused the price spikes. Maybe it did, but I'm not so confident given how and what the government subsidizes (another reason you can't just price hike goods willy nilly. Subsidies are so you can pass on low prices to customers, not so you can pocket more money).

mindslight 3y ago

USD hasn't been a high interest rate environment since the 80's. And it's wrong to assert a direct causality from government spending money to interest rates going up. Rather what happened is the existence of actual price inflation (through whatever combination of supply shortages, legislative/executive government spending, and algorithmic collusion) caused the Federal Reserve to have to pull up from their ZIRP autopilot corporate handout of the past several decades. For financial sustainability, we should all be pushing for the current moderate interest rates to be the new normal for the next several decades - enough time for 30 year mortgages and T-bills to mature, so asset prices correct. Since the Federal Reserve hasn't demonstrated any ability of self restraint, we should be supporting purposeful government spending on real investments which will prevent the Fed from dropping rates again. Furthermore it is much nicer for the economy at large when monetary creation (and thus price inflation) happens in deliberate areas needing strategic investment, instead of bubbles of whatever arbitrary asset class the bankers choose to run up each month.