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On May 05 2023 11:48 Salazarz wrote:Show nested quote +On May 05 2023 01:01 Acrofales wrote:On May 04 2023 21:07 Salazarz wrote:
Price increases that affect the poor the most aren't happening because of 'inflation', they're happening because of corporate profiteering. It's not as if potatoes and milk go up in price 25% because of 'inflation' and it's not as if raising interest rates is a solution to that. In addition to what Mikau said, raising interest rates really is a solution to that. Situation 1: low (or even negative) interest rates. Ergo, money is super cheap to borrow. Therefore anybody with an idea can borrow money with low risk to invest in any kind of crockamamy scheme. Some clever people find a way to make profit with potatoes and milk, exploiting people who actually need the potatoes and milk => high inflation. Situation 2: high interest rates. Ergo, borrowing money is expensive. "Risky" investments with low ROI such as messing about with potatoes and milk is unattractive. => less inflation. Although to be fair, the inflation in potatoes and milk is not due directly to people speculating on milk and potatoes (I'd assume), but rather doing so with other goods, which either make using land use more expensive => milk and potato prices go up, or transport more expensive => milk and potato prices go up. I know what inflation is and what interest rates do, but low interest rates are not the reason food prices are exploding recently. We've had 15 years of much lower interest rates and basic life's necessities were going up in price, sure, but not nearly as much as they have been in the past couple years. The main thing affected by low interest rates that actually resonates with 'normal' people is the housing market. The idea that overpriced foodstuffs today are the consequence of near-zero interest policies of the past 15 years somehow now catching up to us seems rather far fetched to me. Inflation talk is a cart blanche used by anyone and everyone to justify ramping up prices beyond what would have been considered reasonable or acceptable in the years prior, it is well reflected in the fact that companies across a variety of sectors are posting record high profits despite the never-ending talk of needing to cut spending at a time when regular people are barely making ends meet. You can't seriously claim that the price of potatoes and milk is high because of inflation or 'related factors' in a year where pretty much every major food retailer ever has posted record profits of the last 10-20 years while interest rates have finally bulged from being effectively zero for over a decade. It's plain old profiteering in a time of crisis, the kind over which people used to lynch merchants back in the day.
Clearly you don't know what inflation is, because you are mixing up cause and effect when describing it. Inflation doesn't cause milk and potatoes to go up in price. Inflation is high because milk, potatoes and other "basket items" increased in price. All inflation does is summarize how much money is spent on general cost-of-living expenses, in comparison to the same cost-of-living expenses a week/month/year ago.
So yeah, you're 100% correct that milk and potatoes aren't high because of inflation (although "related factors" is such an broad nonsense term that maybe it'd be caught in that catchall and I would indeed claim that).
Inflation being caused by retailers making record profits is definitely possible, though. And Kwark explained FAR better than I did how raising interest rates is going to affect inflation.
But if you're just trying to say "CAPITALISM SUCKS" because people make profits regardless! Then go ahead. Yell away.
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We have plenty of available data regarding commodities, materials, and retail prices to understand the answer to this. This is corporate greed through price gouging. There likely was some level of actual “natural inflation”, but these dynamics have been studied to death and the specific numbers regarding how much things cost is not a mystery. What we are currently experiencing, particularly in food prices, is increasing prices beyond what is necessary. It is a conscious decision to have higher profit margins at the expense of society and it is plain as day. It is extremely dishonest to pretend this is some kind of amoral natural gust of wind blowing this way or that way.
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I’m not economist but I have two big issues with the “it’s just corporate greed through price gouging.” 1) corporations always try to maximize profits. There’s no sudden uptick in “corporate greed.” If they could have made more money by simply raising their prices than they would have done that long ago. And 2) price gouging is prevented by competition. Chevron can’t just sell gas for $10/gallon to make more money because the gas station across the street will get all the business. You could argue that there is some unspoken collusion going on where the large players in a given sector have agreed to raise prices and not undercut each other. The problem I see with that is there is high inflation happening everywhere which makes it hard to believe that we have these price fixing oligopolies in every sector. But like I said, I’m no economist. If someone wants to make this case with evidence I’m all ears but so far the people posting about it in this thread haven’t offered too much besides “trust me bro.”
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I don't understand how people can conclude that rising profit is proof of corporate greed or price gouging. I assume people mean rising profit in numerical sense.
According to my knowledge generally every invidual's mark up is x% instead of a flat number in the supply chain. So if anyone raises price in the supply chain, that's going to effect the entire remaining part of the supply chain. Assuming the market can bear the price increase.
Therefore increased material costs should increase everyone's profit numbers.
Profit percentage should be more interesting.
If I made 10% on my investment last year, then I double my invested capital and make 7% this year. My return will be much higher in numbers but most people would agree that my previous year was better.
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On May 07 2023 16:59 DaveExecutor wrote:
I don't understand how people can conclude that rising profit is proof of corporate greed or price gouging. I assume people mean rising profit in numerical sense.
According to my knowledge generally every invidual's mark up is x% instead of a flat number in the supply chain. So if anyone raises price in the supply chain, that's going to effect the entire remaining part of the supply chain. Assuming the market can bear the price increase.
Therefore increased material costs should increase everyone's profit numbers.
Profit percentage should be more interesting.
If I made 10% on my investment last year, then I double my invested capital and make 7% this year. My return will be much higher in numbers but most people would agree that my previous year was better.
Yes, agreed the term "record profits" doesn't say a whole lot. Consider this example:
Elizabeth Warren Blames High Food Prices on Grocery Chains' 'Record' 1 Percent Profit Margins
This was not a new topic for the senator: In December, she sent a letter to Kroger, Albertsons, and Publix, excoriating the grocery giants for "passing costs on to consumers to preserve your pandemic gains" and "taking advantage of inflation to add greater burdens." The letter noted that while grocers' profits had risen during the pandemic, the chains had not reinvested that windfall into "lower prices for consumers" and "protect[ing] and compensat[ing] their workers."
But Warren could hardly have picked a worse industry to use as an example: Grocery stores consistently have among the lowest profit margins of any economic sector. According to data compiled this month by New York University finance professor Aswath Damodaran, the entire retail grocery industry currently averages barely more than 1 percent in net profit. In its most recent quarter, Kroger reported a profit margin of 0.75 percent, during a time in which Warren claims that the chain was "expanding profits" due to its "market dominance."
Going after Kroger for their 1% profit margins is wild. The idea that that 1% somehow encapsulates the corporate greed and profiteering that's causing people to not be able to afford groceries seems to defy reason. But as long as you just keep repeating "record profits" (which, as you said, doesn't mean a lot without proper context) you can get a lot of people to buy it without giving it much thought.
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fwiw most of the recent inflation is housing, which is quite literally rent seeking.
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On May 07 2023 10:35 BlackJack wrote:
I’m not economist but I have two big issues with the “it’s just corporate greed through price gouging.” 1) corporations always try to maximize profits. There’s no sudden uptick in “corporate greed.” If they could have made more money by simply raising their prices than they would have done that long ago. And 2) price gouging is prevented by competition. Chevron can’t just sell gas for $10/gallon to make more money because the gas station across the street will get all the business. You could argue that there is some unspoken collusion going on where the large players in a given sector have agreed to raise prices and not undercut each other. The problem I see with that is there is high inflation happening everywhere which makes it hard to believe that we have these price fixing oligopolies in every sector. But like I said, I’m no economist. If someone wants to make this case with evidence I’m all ears but so far the people posting about it in this thread haven’t offered too much besides “trust me bro.”
You're not an economist but economists mostly agree that increasing profit margins do not cause inflation. Even assuming market power has increased it increases the price level and does not cause a sustained rise in prices (inflation). E.g. a monopolist will set the price of the product at a price at which it maximizes profit and, all else equal, keep it there. Profit margins have also not changed much in the last decade which is what you'd expect if it caused inflation.
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On May 07 2023 19:35 BlackJack wrote:Show nested quote +On May 07 2023 16:59 DaveExecutor wrote:
I don't understand how people can conclude that rising profit is proof of corporate greed or price gouging. I assume people mean rising profit in numerical sense.
According to my knowledge generally every invidual's mark up is x% instead of a flat number in the supply chain. So if anyone raises price in the supply chain, that's going to effect the entire remaining part of the supply chain. Assuming the market can bear the price increase.
Therefore increased material costs should increase everyone's profit numbers.
Profit percentage should be more interesting.
If I made 10% on my investment last year, then I double my invested capital and make 7% this year. My return will be much higher in numbers but most people would agree that my previous year was better. Yes, agreed the term "record profits" doesn't say a whole lot. Consider this example: Elizabeth Warren Blames High Food Prices on Grocery Chains' 'Record' 1 Percent Profit MarginsShow nested quote +This was not a new topic for the senator: In December, she sent a letter to Kroger, Albertsons, and Publix, excoriating the grocery giants for "passing costs on to consumers to preserve your pandemic gains" and "taking advantage of inflation to add greater burdens." The letter noted that while grocers' profits had risen during the pandemic, the chains had not reinvested that windfall into "lower prices for consumers" and "protect[ing] and compensat[ing] their workers."
But Warren could hardly have picked a worse industry to use as an example: Grocery stores consistently have among the lowest profit margins of any economic sector. According to data compiled this month by New York University finance professor Aswath Damodaran, the entire retail grocery industry currently averages barely more than 1 percent in net profit. In its most recent quarter, Kroger reported a profit margin of 0.75 percent, during a time in which Warren claims that the chain was "expanding profits" due to its "market dominance." Going after Kroger for their 1% profit margins is wild. The idea that that 1% somehow encapsulates the corporate greed and profiteering that's causing people to not be able to afford groceries seems to defy reason. But as long as you just keep repeating "record profits" (which, as you said, doesn't mean a lot without proper context) you can get a lot of people to buy it without giving it much thought.
I'm not sure referring to something touting a bunch of conservative talking points about reducing government spending, removing "protectionist policies" and similar. While I agree grocery chains don't make large margins (somewhere between 1 and 3% according to Google, and 1.9% for Walmart according to their financial reports), they deserve to be scrutinized for their business practices in general. Blaming inflation on price gouging by companies making some of the lowest margins seems opportunist, but I guess in politics you make hay when the sun shines.
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On May 07 2023 23:11 JimmiC wrote:Here is a more balanced look at grocery specifically. It hits all the CEOs points the way BJ does, but also the counter points from economists. I tend to have more trust in the people with put the bentlys and super yauchts. But too each their own. https://www.cbc.ca/news/business/grocery-price-analysis-1.6774669
That's one economist and one professor in accounting. An accounting professor is not an economist.
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United States42250 Posts
It's just not a good way of describing the phenomenon. Demand exceeds supply and so consumers bid against each other driving up prices and corporate profits in the process. Someone notices prices are higher and calls it inflation. Someone else notices profits are up and says profits being up causes inflation. But higher profits don't cause inflation, they are both consequences of the common cause, limited supply.
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I linked a poll with a panel of economists two posts ago where the first question is whether market power and increasing profit margins is a significant factor in inflation. It includes multiple nobel prize winners and some of the most prolific and best cited economists in the world. If you want a snapshot about what economists thinks that survey is much better than some random articles.
As to the two articles you link, I cannot open the WSJ article but that EPI blog is (unsurprisingly) incredibly dishonest. In graph A for the light blue bars they use the 1979 - 2019 average and for the dark blue bars they use Q2 2020 - Q4 2021. Now take a look at this graph and you can see why. In Q1 2020 there was a massive drop due to the COVID restrictions with Q2 2020 being the lowest point. After that profits recover. The figure is showing profits reverting to their normal level not some large deviation from the 1979 - 2019 trend. The EPI, as usual, is trying to push an agenda not do serious economic analysis.
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The only way prices ever go down is if things get much much worse than if they stay the same. Free trade has always devalued labor but AI is only going to eat up more and more jobs as time goes on.
Allowing stock buy backs has been a massive mistake and will ruin the country if its allowed to continue.
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United States42250 Posts
Stock buybacks are just a tax efficient dividend. They’re really not anything special.
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Shares of PacWest were under pressure once again on Thursday after the struggling regional bank said that deposit outflows resumed in the first week of May.
The stock was down 20% in premarket trading. Shares of PacWest were already down 40% this month and more than 70% for the year.
The bank said in a securities filing on Thursday that its deposits declined 9.5% during the week of May 5. PacWest said that the majority of those outflows came after media reports that said the bank was exploring strategic options.
The bank also said that it was able to fund those withdrawals with available liquidity. PacWest said it now has $15 billion of available liquidity compared to $5.2 billion in uninsured deposits.
The update marks a change from May 4, when PacWest said that it was not experiencing “out-of-the-ordinary deposit flows” and that total deposits had increased since the end of March.
During the first quarter, PacWest’s total deposits declined 16.9%, and the bank said it would use strategic asset sales to reshape its balance sheet.
Other regional bank stocks were also under pressure in premarket trading, with Western Alliance falling more than 6% and Zions Bancorp falling 2.7%. The SPDR S&P Regional Banking ETF (KRE) was down 1.9%.
The regional banking sector has been under pressure since early March, when concern about the impact of higher interests to a run on deposits at Silicon Valley Bank, which was seized by regulators. Signature Bank soon followed, and then First Republic was seized and sold to JPMorgan before the market opened on May 1.
Source
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EPT
