Why is inflation so sticky? It could be corporate profits

https://www.wsj.com/articles/why-is-inflation-so-sticky-it-could-be-corporate-profits-b78d90b7

by gnicholas • 3 years ago

216 301 3 years ago

gnicholas2• 3 years ago

“We do have to think about pricing differently,” said Ms. Weber. “A cost shock, or bottlenecks can create an implicit agreement among firms that raise their prices, so they can expect others to act likewise.”

Interesting theory. I've definitely seen some restaurant surcharges from COVID stick around even as they have fully opened.

juve19962• 3 years ago

This only works in an environment that's flush with cash. E.g. a decade long bull market with artificially low interest rates, 2018 tax cuts, and stimulus from covid. Was a perfect storm.

autoexec4• 3 years ago

It works fine as long as the money you lose from the people you price out amounts to less than the money you gain by overcharging others who can afford it.

You don't need an environment flush with cash for that to happen, you just need enough people who are well off enough to pay, or (as we saw in the pandemic) desperate enough to go into debit in order to get what they want.

There's likely a rather large segment of the population who can be pushed out of certain goods and services entirely while companies make record amounts of profit exploiting a smaller pool of wealthier folks.

It's not as bad when it's limited to luxury goods, but it's shitty when the goods people have always been able to afford are suddenly out of their reach and it's a real problem when increasing segments of the population are priced out of things like healthy foods, PFAS free cookware, healthcare, or housing.

silisili3• 3 years ago

It's a likely theory.

But economics teaches us when a player overcharges, others will step in to undercut and take all the market share.

So, we're at a point where we need to admit that mantra isn't true in the modern age, or admit that we've done a terrible job at preventing effective monopolies/duopolies from forming.

jfengel2• 3 years ago

That is what the first two weeks of economics teaches.

The rest of the curriculum is about how wrong that is.

silisili3• 3 years ago

Perhaps you went to a better school than I did.

I only did 101 and 102, but even then the professor always spoke in terms like we were some old village, probably to make things easier to understand. But obviously those analogies don't apply to the world today, mostly.

snapplebobapple• 3 years ago

Thats not really accurate. The rest of the curriculum is about how that is still correct but how people attempt to gain market power so they can stop others undercutting them, bringing market back to efficiency.

baryphonic2• 3 years ago

That wasn't my experience. Intro to micro had the simplified model throughout. Intermediate & advanced macro are all math.

Macro at all levels is Keynesian theory plus increasing levels of math. IMO, much of macro resembled alchemy.

Several upper-level classes, though by no means all, took the assumptions in earlier classes, tore them down, and then re-built economics from there. These are assumptions like preferences being transitive, perfect information, rational self-interest, etc. Many of the claims of econ are defensible even when the assumptions are not. Game theory, for instance, is a very solid defense of economics (albeit one I don't agree with). Institutional econ, political econ & public choice are another family of approaches. Some approached like behavioral economics attempt to "debunk" old theories, though these have had problems with things like replication.

Also, econometrics is quite widespread now. Undergrads typically must take at least one semester of it, and OLS regression is essential for understanding certain papers in most upper-level classes. Econometric models are empirical and have only a tenuous relationship with the mainstream theoretical models like supply & demand, AD-AS, ISLM, or the various growth models.

It's not too dissimilar from physics (economists are infamous for physics envy), where Newtonian physics is wrong but still worth learning.

fionic• 3 years ago

I’d say it’s roughly still true it just looks different than a very traditional sense. “Undercutting” happens in different ways now - while some entrepreneurs don’t care to compete in commodity markets and compete in tech since it’s not as messy and scales more easily. In tech people can be sold products for “free” and it’s all about their data. But for commodities for example to start an egg/dairy farm you need land and lots of physical resources. So these days a lot of times instead of competing with the egg farmers or dairy directly, entrepreneurs are making faux eggs/dairy. So instead of a new farm they’ve invented a “new” egg/dairy and so instead of undercutting they’re actually charging more for it since it’s a premium product now and “healthier” or is saving the planet/backed by an expensive mission.

BreakfastB0b• 3 years ago

If this were true, wouldn’t all corporate profits be next to zero as companies compete on the slimmest possible margins?

silisili3• 3 years ago

Yes, this is what econ 101 teaches, or did when I was in school.

See: https://en.m.wikipedia.org/wiki/Zero-profit_condition

https://en.m.wikipedia.org/wiki/Perfect_competition

_hypx2• 3 years ago

Some companies are playing with fire by charging so much. A notable example is Nvidia, which is basically crippling its own lineup with their weak specs and high prices.

andromeduck• 3 years ago

That's more because supply shortage from the bens of moore's law and design costs are still exponentially growing so there's incentive to slow walk your development/release to maximize lifetime value.

refurb6• 3 years ago

Economics is theoretical. Nobody believes it perfectly describes the real world. No model is correct, but all models are useful.

As well, nobody said economics happens on an instantaneous timescale. Those trends can still happen, but take weeks, months or even years to play out.

simiansays• 3 years ago

Why not both? The modern dismantling of antitrust regulation and enforcement is a significant driver of both. It's gotten way worse now than ever, to the point where private equity firms like Vanguard and Blackrock can be the biggest shareholders in direct duopoly competitors (KO and PEP are an example), or where investors and producers are permitted to fully horizontally and vertically integrate (AMZN is an example). And media (among many other industries) has been permitted to consolidate to ridiculous levels that would have been unimaginable to the architects of early-mid 20th century antitrust laws even on a practical level -- an Amazon-level entity would have been literally impossible to envision in the early 20th century because companies just practically couldn't get that big with manual technologies.

The largest US company in 1929 had revenues of about $1.5bn - roughly $30bn in 2023 dollars, which wouldn't even put it in the Fortune 100 today. Walmart today has revenues of about $600bn, which is roughly equivalent to 6x the top 50 companies in the US in 1929 combined!

It's mind-blowing to me that economics is still using these ridiculously old, flawed models whose assumptions are less true than ever. To me, econ 101 should be teaching how irrational consumers and lawmakers are, what state capture is, monopoly-seeking behaviours as the primary modern driver of profit growth, etc...

tzs• 3 years ago

Econ 101 is using those models for the same reason Phys 101 uses Newtonian mechanics in a vacuum with rigid bodies of low mass and no charge and with all collisions being elastic.

They are a good enough approximation to reality in a lot of useful situations, and understanding them does help in later classes when they bring in relativity, electromagnetism, fluids, thermodynamics, quantum mechanics, bodies that aren't rigid, and so on.

Even after you've got all that stuff under your belt the Phys 101 stuff remains useful, because often something that cannot be modeled accurately enough with just Phys 101 material can be modeled accurately enough if you take the Phys 101 model and tweak it a bit with the rest.

I believe its the same in economics.

0xy3• 3 years ago

You cited Amazon's vertical integration as a reason they need to be broken up, however Amazon retail's margins vary between 0 and 5%. Walmart on the other hand is more like 25%.

Amazon is the best middle man that customers could ever want. They clip the ticket an almost imperceptible amount.

The stores you'd probably promote, small mom and pop stores, generally have 50%+ margins.

Who exactly is gouging customers? It's not Amazon retail.

mrep• 3 years ago

The largest US company in 1929 had revenues of about $1.5bn - roughly $30bn in 2023 dollars, which wouldn't even put it in the Fortune 100 today. Walmart today has revenues of about $600bn, which is roughly equivalent to 6x the top 50 companies in the US in 1929 combined!

US real gdp is 10x what is was in 1947 [0] (FRED only goes back to 1947). Add in the extra 18 years and the fact a bunch of companies are now global thus expanding their markets and those revenue numbers don't look so surprising.

Also, why'd you pick the start of the great depression as your start date?

[0] https://fred.stlouisfed.org/series/GDPC1

zhte415• 3 years ago

If an econ forum started a discussion of physics with discussion of what the ether teaches us, it would be quickly dismissed. Yet HN's fine, again, with the equivalent as the starting block, indeed highest voted comment, for discussion of an econ topic. Wisdom of the crowds perhaps, though crowds of people did once stone crows.

honkycat• 3 years ago

weak argument.

econ and physics are two wildly different fields.

you are comparing a natural science to a social science.

ikiris• 3 years ago

If an econ forum started discussing gravity, there'd be some austrian physics guy yelling about how the invisible hand of the market pushes down on everyone.

mlyle• 3 years ago

Econ indeed does teach us what the poster suggests, in perfect competition.

If we're finding that lots of businesses have substantial pricing power, such that it's a driver of inflation (and this is open to debate)... then it looks like we have a whole lot of really imperfect competition.

praptak• 3 years ago

Econ can't hold a light to physics in terms of falsifiability of hypotheses yet people still treat it as hard science.

RandomLensman• 3 years ago

These days it is about exploiting willingness to pay, so (some) companies tend to model how much they can charge or how to charge more (incl. by increasing consumer surplus). Overcharging is less likely in such a setting.

ohjfjfk• 3 years ago

With what capital will someone step up and undercut the minority that have monopoly control of capital?

At this point it’s a network of too few who collude out of view.

AnthonyMouse3• 3 years ago

So, we're at a point where we need to admit that mantra isn't true in the modern age, or admit that we've done a terrible job at preventing effective monopolies/duopolies from forming.

It's objectively obvious that the latter is true, but why?

One of the reasons is regulatory capture. But another is that people have stopped believing the former.

Suppose there is a market with an existing duopoly that charges high prices and you're a rich investor who likes to make money. Popular theory says that you shouldn't enter that market because they'll just undercut you until you go out of business and then go back to charging high prices.

But how does that work? Once you've invested the money to enter the market, you're committed. The incumbents have to deal with that. If you charge slightly less than they do, they have four options. One is to ignore you and keep doing what they were doing, which would allow you to take a disproportionate share of the market. Another is to match your price. But then you still get a third of the market where you previously had none and you now have goodwill with customers because you finally caused the market price to move in the direction they like, so that's quite profitable for you. The third is to buy you out, which is you turning a profit again.

The last is to undercut you and launch a price war. But by then you've already paid to build the infrastructure needed to compete with them. It exists. Even if you were to give up, you would still have that infrastructure to sell to anyone who wanted to give it a go. And if the expectation is that prices would return to profitable levels at any point in the foreseeable future, there would be returns in doing that for anyone with money to invest. Which mitigates your risk. And means the incumbents can't eliminate the competition by doing this. They can only torpedo their own profitability. Their real options are to lose some of their market share to you or buy you out, both of which are profitable to you.

So who taught investors that doing this is not profitable?

doublespanner6• 3 years ago

Only if the infrastructure is something tangible, often the startup costs are regulatory, and not necessarily transferable.

There is also the problem that if the incumbents move to undercut, then any onlooker would assume that even if they bought the infrastructure they would also face the same undercutting; and would therefore have to remain solvent longer than an incumbant to make a return.

I think this is why there is so much focus on tech or disruption; you need some way to compete against the scale efficiency of the incumbant.

navane• 3 years ago

it is only profitable if you are a big corp who made his money elsewhere, a significant amount of money compared to the money in the market you're trying to enter.

We've always known that a big guy can come into a small guys party and squish them all. That's why microsoft wasn't allowed to push their browser (OS = big guy, browser market = small guys party).

This is why amazon shouldn't be allowed to sell its own items in its own store, any supermarket really. With their power of scale, these market owners can squish anything they sell in their store, killing competition with it.

127• 3 years ago

Without strong regulation, free markets do not work, as the players start to distort the market to win.

spaceman_20203• 3 years ago

Tough to happen in a world of monopolies.

Look at all the bank failures and mergers - it just gives pricing power to a couple of banks.

mordae2• 3 years ago

But economics teaches us when a player overcharges, others will step in to undercut and take all the market share.

1. They will all reluctantly increase the prices, testing waters.

2. And as long as their stuff sells, they will keep rising them.

3. Eventually consumers will get fed up with their preferred brands screwing them over and start switching.

4. Aggressive sales will start to pop up, making the consumers reconsider.

5. Eventually the sales will taper off with new prices established.

Most customers will stay loyal to their brand(s). Some will switch.

npteljes• 3 years ago

economics teaches us when a player overcharges, others will step in to undercut and take all the market share.

A take I've read and stuck with me is that right now, there's also significant risk. In my country, Hungary, there are also losses introduced by the government, which capped the prices of several popular items. A way for a business to stay afloat is to incorporate this risk into their prices - and I think that this risk also makes the other players more hesitant to undercut. And thereby they all enjoy the benefit of the higher price.

dclowd9901• 3 years ago

Bare economics theory doesn’t account for the myriad irrational inputs that the actual world sees. For that, you go to behavioral economics, which tells us that choice isn’t just price, it’s also:

- convenience - availability - familiarity - self-image - etc etc

People buy a thing for a million different reasons that have nothing to do with price.

Paul-Craft2• 3 years ago

https://archive.is/8rNrM

Paul-Craft2• 3 years ago

Why is this a good explanation now, when 6 months ago it was being pooh-poohed?

Take a look at the graphs in this article: https://www.politifact.com/article/2022/dec/10/what-do-high-...

The graphs lay out a clear picture of rising corporate profit margins, meanwhile the text is saying to "Ignore the man behind the curtain." What's different today that the WSJ can run this piece today?

gnicholas2• 3 years ago

Could be that price increases are remaining high, even as supply shocks have abated.

autoexec4• 3 years ago

Of course that's what happened. Once companies saw they could make money hand over fist charging higher prices why on earth would they ever lower them back down once the supply issues were gone? Instead they just made record profits while they shifted the blame from "It's not our fault! There are shortages!" to "It's not our fault! It's inflation!"

Meanwhile they've suckered a bunch of folks into blaming inflation on the pathetic amount of government aid we gave people during the pandemic so that they didn't immediately lose their homes or starve to death while nobody could work. Now consumers are facing record amounts of debit, and evictions and utility disconnections for non-pay are rising and people still think the problem is that Americans just have too much free money.

bugglebeetle3• 3 years ago

The Fed started blowing up banks in its attempt to crush worker wages because when you kill a 1,000,000 plus people, disable countless more, force a bunch of early retirements etc you have to jack up rates super high, super fast to overcome wage increases from the resulting labor shortage. People who read the WSJ work at and invest in banks and don’t like to lose their shirts. So, they’re conceding to a little internecine war among the ownership class in the hope that the financiers can squelch the corporate price fixers before the banking system implodes.

robocat2• 3 years ago

when you kill a 1,000,000 plus people > resulting labor shortage

Alternatively when you kill a bunch of mostly retired and sick people, perhaps you increase unemployment (nurses and rest home workers freed up) and decrease spending (dead people don’t buy services or goods).

Besides, the total number affected is a very low percent of the population, which is less significant than other economic changes over the previous 20 years.

Without some deeper analysis, your cause and effect is purely hypothetical.

freitzkriesler2• 3 years ago

Our income are worth less and our food stuffs are being shipped abroad because there are certain countries willing to pay more than we are for it (cough china cough). An export ban would do wonders at lowering food prices but that would worsen the already bad trade deficiet.

Don't expect any help from any one in this regard .

qeternity3• 3 years ago

In the past 15 years we engaged in unprecedented fiscal and monetary stimulus, which saw US Govt debt triple to $30T and the Fed balance sheet increasing 8 fold to $9T.

But yeah, I'm sure it's corporate profits.

rhaway84773• 3 years ago

And yet despite 15 years of stimulus we have had persistently low inflation for all except the last 2 years or so, the first half of which was very clearly driven by supply chain issues.

It’s almost like even if stimulus has had an impact it’s not the only, or even the primary driver.

qeternity3• 3 years ago

Inflation is never linear, and tends to over/under shoot.

Under normal circumstances, supply chain issues (otherwise known as supply reduction) results in demand being priced out of the market. But we didn’t do that. We gave stimmie checks, and gas cards, and increased unemployment benefits, and paused loan repayments.

When there’s not enough of thing X it means some people won’t get thing X. Giving people money to make it “more affordable” just pushes price higher without increasing affordability (as the market still settles on a market clearing price).

refurb6• 3 years ago

But supply chain issues have resolved yet inflation is still high?

If you want to understand why the massive expansion of the monetary supply didn't initially stoke inflation, Professor Selgin does a nice job of explaining it.

https://www.cato.org/blog/rudderless-fed

Basically, the Fed printed new money, but at the same time offered a very high interest rate on Excess Reserves held at the Fed (first time ever in 2008). So banks took the new money, and deposited it back at the Fed because they got a higher interest rate than anywhere else. So at least for the for a while, a lot of the new money never entered the broader economy. Check the Fed's charts on excess reserves. $3.2T dollars was just sitting at the Fed collecting interest.

https://fred.stlouisfed.org/series/EXCSRESNS

This was entirely intentional by the Fed. Bernake said "our liquidity provision had begun to run ahead of our ability to absorb excess reserves held by the banking system, leading the effective funds rate, on many days, to fall below the target set by the Federal Open Market Committee. … Paying interest on reserves should allow us to better control the federal funds rate, as banks are unlikely to lend overnight balances at a rate lower than they can receive from the Fed"

The Fed was initially try to "sterilize" the new money by selling Treasuries at the same time (print $1T in money to buy failed assets, sell $1T in Treasuries = net $0 new money). But they ran out of Treasuries, so resorted to printing new money, but incentivizing banks not to use it because otherwise the they'd drive the interest rate way below target.

vinyl7• 3 years ago

We've had inflation. Inflation was in assets rather than in commodities. Housing is insane, the stock market is detached from reality, billion dollar evaluations for mostly valueless companies. The only reason inflation started hitting consumers is because asset growth reached the end.

thworp• 3 years ago

No, we have had lower „inflation“ according to the CPI which is a single number for a multi-dimensional and connected phenomenon. The real impact can be seen in the price of large city real estate, tech stocks or luxury goods. Those certainly didn’t have low price increases.

The extra money largely ended up there because a side effect of the stimulus was that safe investments had negative real yields. In response people chased any positive real yield. This is why Pension funds invested in crypto, they could not guarantee their promised growth with just treasuries and aaa bonds.

wg0• 3 years ago

Basic issue isn't excess of money. Basic issue is shortage in supply. Demand hasn't skyrocketed magically.

The world over production levels were lowered to almost zero for couple of years.

Interest rate hikes have wreaked a havoc of their own.

autoexec4• 3 years ago

Basic issue is shortage in supply.

What's the supply issue that's impacting normal grocery store items? Is there a ship full of peanut butter ground beef and breakfast cereal stuck in a canal somewhere? Why would we have a shortage of things like cheese and pasta?

For a short time there were real issues with things like toilet paper, but even that has been resolved (unless you're in the EU maybe). What's driving shortages now?

andrekandre2• 3 years ago

  > What's the supply issue that's impacting normal grocery store items?

well, for eggs, just to take 1 example: bird flu *

* https://www.nerdwallet.com/article/finance/why-are-eggs-so-e...

refurb6• 3 years ago

Why would a supply chain issue in a handful of products cause the price of all items to go up?

That makes no sense.

2000UltraDeluxe3• 3 years ago

Handful of products? In Finland, at least, much of the grocery market is controlled by two dominant players that more or less control the entire supply chain for many products. Both have been profiteering like crazy lately, and for most people there's no option than their local supermarket.

theshrike79• 3 years ago

The supply shock was the initial reason.

Then corporations figured out that they could make huge bank and kept rising prices -> inflation.

brianjking• 3 years ago

It is 100% corporate profits, lol.

ageek123• 3 years ago

Isn’t this reversing cause and effect? Corporations are able to raise prices because consumers are willing to pay higher prices. Corporations always want to make as much profit as they can. If consumers can pay more, you get inflation.

baryphonic2• 3 years ago

The phenomenon you describe has a name, "demand-pull inflation." It even has a Wikipedia page.[0]

[0]https://en.m.wikipedia.org/wiki/Demand-pull_inflation

mitthrowaway26• 3 years ago

Competition should drive down prices even if consumers have deep pockets.

This suggests that the US market has gotten less competitive. I wonder how much it has to do with ownership of competing firms by a few large index funds with concentrated voting power.

rossriley2• 3 years ago

Don't forget supply and demand works on the capital side of the equation too, higher inflation means shareholders push for higher profits in the same way that high inflation causes workers to push for higher wages.

There's increasing supply of investments at higher rate of return, bond yields are close to 4% which means riskier investments need to pay more to compete.

paxys2• 3 years ago

Their argument is basically that while normally a company raising prices would mean that some of their customers move to a competitor, in today's environment there is an implicit agreement that every company will keep prices high.

So are they saying that the free market is basically not a thing anymore because of covid, and no company wants to get an edge over its competitors by undercutting on price despite having record margins?

rhacker2• 3 years ago

Technically does that mean the FTC can literally go after all the companies for collusive price fixing?

paxys2• 3 years ago

Well they are saying there is no collusion. Companies are all individually deciding to raise prices and not bringing them down.

klysm3• 3 years ago

Tacit collusion isn’t illegal

medion• 3 years ago

Anecdotal, but it feels like there are less competitors. So…

arcticbull5• 3 years ago

That is certainly part of the story yes. Especially in grocery. It's wild how much better a job restaurants did controlling their food costs than individuals could.

bugglebeetle3• 3 years ago

No, it’s the result of the massive shift in antitrust regulation from the Reagan era on, where US largely abandoned anti-monopoly enforcement, resulting in corporate concentration and collusion. The free market is “not a thing” because of a lack of real competition.

gjulianm• 3 years ago

I don't think it's about the free market not being a thing. It's that, in a context where every company is increasing prices and customers have resigned and accepted that reality, the increased profit from extra clients is less than the increased profits from higher prices.

arcticbull5• 3 years ago

Good Odd Lots episode goes into this theory. [1] Basically companies found that by raising prices, they were able to increase profits despite shipping fewer units - and they wanted to see how much they could do so. When Pepsi had to leave Russia, which accounted for 4% of revenue, they just increased the price in the rest of the world to compensate without issue. And seeing that, Coke followed suit.

However at this point in the arc, companies are losing their ability to push prices. They won't pull them back or anything, but we are seeing reversion to the mean.

That stabilization should be sufficient to see much lower inflation levels moving forward.

[1] https://www.youtube.com/watch?v=UIpcfmAfOJo

yanderekko5• 3 years ago

This story is not incompatible with a more-basic one where inflation debases the currency, so when a company starts exploring price hikes for whatever reason they unsurprisingly realize greater profits (since they were implicitly lowering the price by selling for the same quantity of a less-valuable currency). Imagine that Pepsi was selling for ETH in 2021, then "discovers" after the price of ETH halves in 2022 that they can get away with hiking the price - in this case the price hikes are the consequence of the currency devaluation, not the cause.

s1artibartfast6• 3 years ago

I think Pepsi and Coke are really interesting example because they are not necessary to live. Many of the arguments in this thread rely on the idea that companies are coordinating to price gouge for life-sustaining Goods. If that were the case why do we see inflation in optional Goods as well

ars• 3 years ago

It only works for a while, then customers start switching to cheaper brands and they reduce prices again. See this article: https://www.reuters.com/business/retail-consumer/tide-maker-... which has more detail on this.

whitemary• 3 years ago

The "free market" has never been a thing

contravariant• 3 years ago

Especially not in the short term.

_fizz_buzz_• 3 years ago

I assume that at some point prices will normalize again. But my assumption is that the feed back loop of the free market also has a time delay and needs time to self-correct and I guess this time delay can be longer than expected. Especially when supply chains are disrupted, for many products customers often cannot simply switch to a competitor. Covid kind of "broke" the free market, and it will heal itself, but it takes longer than expected.

_cenw• 3 years ago

I'm not sure COVID is a root cause rather than a convenient occasion.

The free market is supposed to work through scale and optimization; scale is still a relevant force, but mostly serves market consolidation. Optimization is not something that can be frequently innovated on. So everyone has pretty much the same cost basis in long established industries like food.

There is simply no incentive for these corporations to start a price war; they all know starting one will only result in a very brief competitive advantage until everyone returns to baseline profits.

Funnily enough, a lot of recent reductions in cost basis in "innovative" startups is not done through optimization; it is done through VC speculating on their competitor finding a more permanent place in a (supposedly) new market after consolidation and prices adjust back to reality. An example I can come up with of this is food delivery services in Germany: For a while, several providers were undercutting each other in price and service level. Now all of Germany is dominated by Takeaway, and their service level is slightly above "we don't care". We'll see the same in instant grocery delivery in a year or so. Getir seems to be winning that one. Until then, enjoy ridiculously cheap instant grocery delivery, powered by VC funding and extra dirty worker exploitation (only one of those will continue to exist).

mjevans• 3 years ago

Things I pay a lot for:

* Rent (they're all high; and can't afford to buy anywhere near where I work)

* Food (prices are pretty much the same everywhere)

* Internet (Cable's the only modern-speed option where I currently rent)

* Energy / Gas - either utilities or again, the same everywhere

I think most everyone else is in the same boat. I can scale down some of these a little bit, but they're all fairly __inelastic__. I can't stop eating. I need all of these for life and work.

Want to tame inflation? Tax the hell out of profits above X%!!! Someone's making money on this.

yanderekko5• 3 years ago

A good where consumers have inelastic demand does not mean that individual companies face inelastic demand curves - that's the whole point of competition. ie. It doesn't matter if you're willing to pay a lot to avoid starvation since no individual company is making profits off of having some market power to starve you.

The thought that food providers are colluding to raise prices is absurd and should serve as a reductio ad absurdum in these arguments, not a fundamental explanation for "greedflation".

dmurray• 3 years ago

Food (prices are pretty much the same everywhere)

I can't believe this is true. Either you're shopping for food at a subsistence level, in which case you know exactly what you're missing and how much easier it would be if you could afford a bit more, or you indulge yourself a bit and you're wilfully ignoring that you could pay less.

gfdsgfsdgfs3• 3 years ago

You'll get more shortages and higher inflation with your solution.

shoubidouwah• 3 years ago

the rent, as always: https://en.wikipedia.org/wiki/Law_of_rent

and the companies do not want to compete: most modern large companies only exist as a _vehicle for investment_, and as such compete for shareholders, not consumers. Due to this, short-termism dominates: average CEO stays 4 years at a given company, and performance of the company after they leave is largely uncorrelated with their carreer success, while share prices during tenure actually does.

So they'll suck the blood from us, crash everything, and get a raise when politicians ask them very nicely to try and fix it. And while share prices will go down on the S&P, billionaires will gte richer, and hedges will make bank...

windex• 3 years ago

All of them were sorted during WFH. I moved out to remote places and paid far less. I saved quite a bit on all of the above remote other than Internet of course. The economy is setup to extract your money from you once you've earned it.

bell-cot5• 3 years ago

Notice how many of those things have highly inelastic supply, are monopolies (or close), or have really bloated "value adding" supply chains.

NIMBYs and such ensure that more housing can't be built, at scale, in areas with high rents, to have normal supply/demand dynamic.

Food is relatively cheap, if you cook for yourself and don't mind a lot of beans, rice, bread-machine bread, peanut butter, etc. If you want heavily processed or prepared food, or restaurant food...that's an order of magnitude more expensive. And many parts of the food industry are far too consolidated to be competitive.

Etc.

Taxing the hell out of profits sounds great...but in sectors where the real problems are strangulated supply, monopolies, and massive processing in the supply chain - it won't do much good.

spaceman_20203• 3 years ago

In my country, rents are increasing now after the markets have already been flat or down, the startup boom has long fizzled out, and there are layoffs almost every day.

It's baffling. Rents were down during the pandemic but they've now rocketed up 50-100% in some areas.

prepend4• 3 years ago

Only food is an area where there’s lots of profit, right?

Internet is regulated through phone and cable so profit is hidden into costs and whatnot.

Same for energy.

Rent is hard to determine profit because of the way expenses can be assigned and so much is private landlord direct to renters.

neilwilson2• 3 years ago

Why are prices controlled at all?

Because as a consumer you can go somewhere else.

If there is insufficient excess supply capacity we can't do that in aggregate and prices can be hiked with impunity.

Inflation is always, everywhere, a lack of effective competition.

makomk2• 3 years ago

For almost all goods, price increases will decrease the amount purchased. If there's still insufficient excess supply capacity after substantial price increase and decreases in people's purchasing power and consumption, then the reason competition isn't lowering prices is because that's the actual market-clearing price where demand is equal to the amount that can be produced.

This can't be fixed by forcing companies to lower their prices since they won't be able to supply the demand that exists at a lower price, and attempting to do so anyway via price controls inevitably leads to empty shelves.

scotty793• 3 years ago

So are they saying that the free market is basically not a thing anymore because of covid, and no company wants to get an edge over its competitors by undercutting on price despite having record margins?

Covid has nothing to do with it. Market always worked this way. There's really very little reason for a company to lower the prices below what consumers are already willing to pay. When the market is saturated and all customers are accustomed to paying certain level of prices for a given good and you try to lower your prices for that good it won't automatically mean you'll sell more. You might even sell less because people will assume you sell a good of lower quality. It can take decades for the customers to learn while you are leaving profits on the table. Profits that you might have used for marketing to actually get more sales at higher price.

Try to buy a box of crayons in Florence, Italy.

atchoo• 3 years ago

Try to buy a box of crayons in Florence, Italy.

What is this a reference to?

fallingknife• 3 years ago

If the market always worked this way, why is it being blamed for inflation that has only existed for the past year?

spaceman_20203• 3 years ago

The last two years has been such a clear downgrade in standards and quality across the board.

One product I've bought for 20 years used to be sold in clear glass bottles. Last year, they replaced it with cheap plastic bottles. Then they reduced the quantity by 20% while keeping the same price.

That's just one example, but practically everything I used to buy has either increased in price, decreased in quality/quantity, or often, both together.

Geee• 3 years ago

Yes, they are saying exactly that, and those economists are idiots. They think that prices are the result of costs+profit, rather than optimized to maximize demand*profit; demand being a function of price.

DannyBee• 3 years ago

An efficient free market was never a thing except in the fever dreams of economists.

Most forms of the efficient market hypothesis have been formally proven incorrect. The remaining ones are harder to disprove but can be tied to other things (ie only true if p=np).

There are literally mountains of evidence that you have to ignore to believe in efficient free markets at this point. The evidence for them has always amounted to "I have a theory, I looked at a market for a while and it was sometimes true. Therefore my theory is proven"

All countervailing evidence is "no true scotsman"'d. No inefficient market is free enough you see.

It’s one of those things that people feel like should be true, but just isn’t.

meanwhile, if you start from the theory that there’s no particular reason for free markets to be efficient, stories like this aren't even news.

RugnirViking3• 3 years ago

the free market is basically not a thing anymore

The free market was never a real thing. It's like spherical cows in a vacuum. It describes what you would expect to see given a sufficiently large number of buyers and sellers, with no network effects, with perfect information for buyers and sellers, no players with controlling stake of the market, and over a long enough timespan.

In this case, the fact that most industries have literaly been reduced to one or two players, the powerful force of competition isn't very effective at reducing prices. It might eventually, but because there are so few competing sellers, we'll have to wait a long time.

naasking• 3 years ago

and no company wants to get an edge over its competitors by undercutting on price despite having record margins?

They have record profits, why disrupt a winning formula?

jongjong• 3 years ago

That sounds about right... But if we want to get to the root cause, we'd have to look at the design of the monetary system and the last decade of monetary policy.

Never in history have there been so many market oligopolies; and it coincided with a transition to a global soft money standard as global fiat currencies became increasingly more decoupled from gold.

Before, a dollar could be exchanged for a certain fixed amount of gold; this had clear and objective economic value. Nowadays, money is decoupled from any hard/objective economic value.

Today, banks issue credit proportionally to asset prices which are themselves determined by how much new credit enters the system... A vicious cycle which forces banks to keep loading new generations with more credit at a steadily increasing pace to avoid bursting bubbles.

toss13• 3 years ago

>the free market is basically not a thing anymore

I'd say this has little to do with COVID (beyond that it is a random event that decreased then re-increased demand), but the accumulated effect of decades of failing to enforce anti-trust law.

The most propserous times and bigges middle class ended with the Reagan administration, who in 1983, ordered the DOJ, FTC, and SEC to stop enforcing anti-trust laws dating back to the Sherman Act of 1890[0].

This massively destroyed small businesses and concentrated corporate power. E.g., the closer a store was to the Walmart location, the greater the likelihood it would close. Persky and his colleagues found that for every mile closer to the Walmart, 6 percent more stores closed. Close in around the store's location, between 35 and 60 percent of stores closed. [1]

Previously, anti-trust laws were enforced so aggressively that when Buster Brown and Kinney shoe companies wanted to merge in the 1960s the Supreme Court blocked the merger because the combined company would control about 5 percent of the US shoe market. Nike alone today controls around 20 percent of that market.[0]

Obviously, when anti-trust laws stop being enforced and massive corporations gain oligarchic market and pricing power, they can create inflation at will.

This power needs to be rebalanced.

Again, recognize, that the "free market" is ab absolute fiction — there is no such thing. Every market has rules and regulations, explicit and/or tacit. The only question is what are the regulations and who enforces them.

Absent sufficient regulation, the market dynamics will always end up with all power in the hands of a few major players. This is what is happening here. Looks like is is not the FED that can fix it, it is the SEC and DOJ.

[0] https://www.rawstory.com/amp/gop-party-of-business-265994473...

[1] https://www.bloomberg.com/news/articles/2012-09-14/radiating...

listenallyall8• 3 years ago

The most propserous times and bigges middle class ended with the Reagan administration

Reagan took office in 1981. So you're claiming that the late 70s -- oil embargo, hostages, double-digit inflation and unemployment -- were "the most prosperous times"? Really?

eucryphia• 3 years ago

We haven’t squandered all the money printing fast enough.

frankreyes• 3 years ago

Because companies have to raise prices to the point of replacement. When selling something, that should cover the costs of production of the replacements in order to be able to sell it again. This means the current price has to account for the future costs adjusted to inflation. And this is when inflation gets exponential.

senectus12• 3 years ago

oh come on!

Corp profits dont help, but they're about as consequential as wage increases.

Its sticky because of the money printing done in the past, and still happening.

They printed a TON of money, its devalued our $$$'s. This is the direct consequence.

akra• 3 years ago

Precisely. Inflation is not even - if it were it wouldn't be nearly as much of a concern. There are winners (e.g. corporate profits) and losers (e.g. workers on fixed salaries).

Unfortunately some economic actors can protect themselves, even profit from inflation much easier than others. Inflation usually hits the poor the hardest. Given the same amount of real resources this is because other groups of society can take advantage of inflation to increase their share of the pie.

jfabre• 3 years ago

I honestly can't believe you're being downvoted when you have the most sensible answer here. The government here in Canada created MASSIVE supply of money out of thin air to keep up with the US and put almost 1/3 of the population on social welfare and everyone is pointing fingers to find who's the most greedy. It's the dumbest thing ever.

https://www.youtube.com/watch?v=GJ4TTNeSUdQ

senectus12• 3 years ago

The media seems to be doing its damnedest to push any theory that does not tie into the quantitive easing/money printing.

Its fascinating to watch what i suspect is another bigger collapse (than the GFC) start, and NOBODY in the MSM is looking at the elephant in the room wearing a big loud hat that says "IT WAS ME".

klysm3• 3 years ago

So tacit collusion?

seu• 3 years ago

Free market economists are followers of a cult full of animistic creatures, like the "Free Market" and "Inflation", which have their own volition and just choose to "stick around" or "fairly distribute goods", without the need for absolutely no human to many any decision at all.

"This damned inflation is so sticky!" I imagine one of them complaining, while trying to wash it off their hands. "Yeah, if only Free Market could solve it," says the other, while praying the Corporate Profits to raise even more.

yanderekko5• 3 years ago

Free market economists are followers of a cult full of animistic creatures, like the "Free Market" and "Inflation", which have their own volition and just choose to "stick around" or "fairly distribute goods", without the need for absolutely no human to many any decision at all.

If you can't find a narrative of how "human decisions" caused inflation in 2021-2022 you aren't trying very hard.

I'd say that believing that there was an exogenous shock to greed during the pandemic is much more animistic than these explanations.

proc0• 3 years ago

Printing money to handout to people is not part of any free market theory I know about. Also buying banks with tax payer money to avoid their fall is also not part of any FREE market. When some business get saved but others are forced to close (for any reason), there is no free market. In fact those things are precisely the opposite of "free" and create an uneven playing field where big players have unfair advantages.

yipbub• 3 years ago

IIRC, this seems to imply companies are colluding. Does it even matter if it's tacit or explicit collusion? - Explicit collusion is hard to detect. Someone with interests (an exec with giant options and incentives), meets an Exec from another at dinner. They have a conversation. Who knows? - Implicit/Tacit collusion is easy. The execs know that they can defect (lower prices) as soon as they see the other party defect. Why would a potential competitor ever think arbitrary prices that could sink at any point would be a competitive advantage worth investing in?

solatic• 3 years ago

Where goods and services are not commodified, people are unwilling to pay switching costs ("so much is uncertain, why increase uncertainty when I don't need to?"), so long as price differences are not "too large". This implicitly puts a floor on prices as producers hold onto their customer bases and slowly raise prices on newcomers.

Where goods and services are commodified, the commodities have largely (at least in the US) been captured by oligopolies that implicitly understand that they should keep prices high, no direct collusion required. New entrants to the commodified markets (who would produce the commodities at lower prices) are nowhere to be found, as markets are highly regulated with high barriers to entry.

Break up the oligopolies and encourage entrepreneurship.

perryizgr8• 3 years ago

1. Government prints massive amount of money.

2. Money supply increases, money value drops, definition of inflation, basic economics.

3. Economists and journalists: Is <insert any random reason apart from money printing> causing inflation?

Bs like this erodes public trust in experts and institutions, and we saw the results of that when people started resisting against covid vaccines. Eventually, public trust in US/FED/economists/journalists will drop to such a low level that USD will lose its value entirely.

yazantapuz• 3 years ago

Idk why they are downvoting you... but this inflation issue is chronic here in Argentina and the cause is the govt printing money like there is no tomorrow. And the govt officials, aligned media and the like, all blame the "price makers" (from big corp to small bussiness). Seeing articles like this here is like a dejavu.

politelemon• 3 years ago

In the UK there's a company called Virgin Media (broadband, TV, phone provider) which has been completely blatant about it. They recently informed all customers that going forward they will annually be increasing prices by RPI + 3.9%.

https://www.virginmedia.com/mobile/annual-rpi-price-increase

https://www.ispreview.co.uk/index.php/2023/01/virgin-mobile-...

psychphysic3• 3 years ago

I could understand something smaller like RPI+1.5%

Ultimately I think the private sector pay has risen by about 4-5% annualised so maybe that's where they got that pricing.

Companies always prefer to offer sales and discounts rather than lower prices.

Same with antivirus companies who's model runs on let's hope they forgot renewal will be 10x the price!

This all relies on consumers not switching accounts constantly to the cheaper good-enough good.

dannyw• 3 years ago

rpi is 13%

simonbarker87• 3 years ago

Side note: if you are an O2 customer and a Virgin Media customer you can get your speed bumped up to the next tier for free

Already__Taken• 3 years ago

and ee took CPI 10% + 3.5% profit.

I don't know how that's legal when you look at how the CPI is calculated and it included these companies already. They're adding onto their own adjusted price inflation.

StingyJelly• 3 years ago

The effect an individual company would have on CPI is negligible. Besides, CPI strongly underestimates the actual devaluation of currency. You can look up local newspaper prices from 10 years ago and today and compare that to newspapers index that goes into the CPI calculation and I'm almost sure the price difference would be significantly larger compared to that skewed statistic.

amiga-workbench• 3 years ago

I jumped ship from them before Christmas. I'm with YouFiber now, I get symmetric gigabit for £35/m and £5/m for a static IPv4 address that opts me out of CGNAT. The first 3 months were free.

RugnirViking3• 3 years ago

thats unbelievable. Diabolical.

That is the path to hyperinflation if more companies adopted something similar.

IshKebab• 3 years ago

Vodafone did the same - CPI (10.5%) + 3.9% "to help support the continued investment in our network as we expand coverage". I guess 3.9% is some government limit?

psychphysic3• 3 years ago

It's a sad fact but prices will always remain sticky on the way down.

Then again so do wages, while inflation was small and consistent it oiled that machine to keep from there being a big drop in purchasing power.

But when inflation is in the double digits that all breaks down.

It's also a clear reminder of how so much European utopian aspects (free healthcare, education etc) is run on pure goodwill. Just look at the strike action in the UK with Nurses having seen 15% pay cut (being forced to accept a 5% pay "rise" after much negotiation) and doctors have seen a 21-26% paycut.

Education continues to collapse with tuition fees rising, universities opting for cheap to run, low value courses to pull in money and teachers striking continuously as work conditions go from awful to unbearable.

piva005• 3 years ago

It's also a clear reminder of how so much European utopian aspects (free healthcare, education etc) is run on pure goodwill. Just look at the strike action in the UK with Nurses having seen 15% pay cut (being forced to accept a 5% pay "rise" after much negotiation) and doctors have seen a 21-26% paycut.

It's not run on pure goodwill, it's run on taxes. Taxing corporations has been against the zeitgeist of neoliberalism running since the 80s, the Third Way of social-democracy embedded itself with the neoliberal bullshit in the 90s, it's not a coincidence that since then there's been a steady decline in public services in Europe overall.

The absolutism of catering to business over the rest of society has eroded multiple layers of what holds a society together. Healthcare in the UK is just the latest and most visible stone to fall. Education and healthcare in Sweden has been slowly privatised since the early 2000s, with accompanying declining trends for quality of services (private schools are some of the worst performing, healthcare being public-private has made staff shortages worse), quality of employment (teachers are not so well paid, nurses either), and so on.

The extreme search for efficiency is creating holes that aren't easily priced, side-effects are delayed by years to decades from implementation of policies, it slowly degrades society.

Thatcher's "there is no such thing as society" and Reagan-economics bound us to this hellhole for the past 40 years, maybe some change is required for this bullshit to end.

gfdsgfsdgfs3• 3 years ago

Why are you blaming UK's health crisis on neoliberalism? The NHS is as "socialist" as you could get in Western society.

mkl95• 3 years ago

In my area salaries vary wildly for similar positions at similar companies. And even worse, I have been in bizarre situations like being offered less than what I'm making for a higher level role, at much richer companies. Corporate greed is rampant.

WalterBright4• 3 years ago

Inflation is caused by an increase in the supply of money relative to the value of goods and services they represent. It's simply the Law of Supply & Demand in action.

Where did the extra money come from? The federal deficit creates the money to fund the deficit.

The future deficits in Biden's budget will cause a lot more inflation.

There's no such thing as a free lunch. We will all pay for those deficits.

ShadowBanThis014• 3 years ago

Over-simplified and not true when oligopolies run rampant. Higher interest rates have one squat, and that’s why.

Yet no one is hammering the government on it. HUH.

WalterBright4• 3 years ago

not true when oligopolies run rampant

Oligopolies are not able to increase the money supply by charging higher prices, so they cannot create inflation.

simple-thoughts2• 3 years ago

A few people have said that the response to inflation will be price controls eventually. Reviewing this article and comment section has convinced me that it is politically possible. Perhaps it’s a good time to remind people that inflation has happened many times in human history, as has price controls, and that the outcome will be shortages.

simonh• 3 years ago

Right, the dynamic is that high prices are due largely to shortages. Increasing supply requires investment, so yes price controls would reduce profits, but at the cost of curtailing investment which will sustain shortages and high prices for longer.

It's certainly not great that profits have spiked, a chunk of that will get skimmed off for sure, but profits also do stimulate investment. The government can help by adjusting tax rates and incentives, but the best way to do that here is by encouraging investment not penalising profits. We want that money going to the right places for sure, but the money is needed.

thfuran2• 3 years ago

Reviewing this article and comment section has convinced me that it is politically possible.

How so?

simple-thoughts2• 3 years ago

If people believe that inflation is caused by companies raising prices, the obvious solution (if you accept the premise) is price controls.

biscottigelato• 3 years ago

Tesla cutting prices aggressively at the expense of both their own margins, but also of other automakers having their market share and revenue shrinking massively, puts this WSJ theory immediately to bed.

edrxty• 3 years ago

That would be cool except they're now raising prices

https://www.reuters.com/business/autos-transportation/tesla-...

danaris2• 3 years ago

"Sure, companies across many industries are raising prices despite record profits—but because this one company, which is known to be a bit of an outlier, with a CEO who has been demonstrating sharply increasing erratic behavior, is cutting prices, the whole idea is bullshit!"

z3t4• 3 years ago

Monopolies and cartels love inflation as they can increase the prices.

One interesting thing is that when prices increase, the raw prices decrease. So if you are a middle man you will make huge profits. Demand drops as prices increase. But producers don't want to lower their production. We have a lot of automation in the production chain, so while building a new factory cost a lot, dropping production output from 100% to 90% will save very little money. Over-production causes prices to fall.

CTDOCodebases• 3 years ago

Why is it sticky? Because it isn't just a mathematical equation. Human psycology comes into play and people (those setting prices and those buying) begin to expect prices to increase. Inertial inflation is the term used to describe it.[0]

[0] https://en.wikipedia.org/wiki/Inertial_inflation

bearmode• 3 years ago

It's obviously corporate profits, and it's obviously always been corporate profits.

lvl102• 3 years ago

One example is car dealers. Sure, they can charge MSRP, but they will run out of cars pretty fast. And since they have no control over how much they are allotted by the manufactures, they’re effectively putting themselves at a significant disadvantage versus competition in their market. So the logical thing would be to match their competition and mark up.

In an age where advertisement budget is key to survival for many companies, profitability could determine who gets ahead over the long run.

DrNosferatu5• 3 years ago

No shit, Sherlock:

In Portugal, for most of 2022 to this day, the price of 1L own/white brand of semi-skimmed milk (one of the most basic and essential staple foods) has been the exact same - to the cent - on all different supermarket chains (Lidl, Audi, Auchan, Jerónimo Martins, Intermarché, Sonae, Dia, etc.) operating here. And, it has risen in steady small increments at exactly the same time in all of them, multiple times. As in, price time evolution correlation = 1.0

If this is not price fixing, I don't know what it is. The regulators just whine and yawn.

And obviously, MBA-types haven't read Numerical Recipes' chapters on random numbers ;)

permo-w• 3 years ago

are you sure that’s not just the result of public price controls on basic products?

DrNosferatu5• 3 years ago

Nope. No price controls ever enacted. Only recently, a sales tax exemption on basic staple foods was put in place - just started May 2023. (which will be obviously absorbed into retailer's profits)

And I actually surveyed the price data in person.

DrNosferatu5• 3 years ago

Right on the money:

https://youtu.be/Bo2BxTcVp74

Mark Blyth is definitely one of the most clear-sighted economists of today.

DrNosferatu5• 3 years ago

Really?

Why did someone downvote this very elucidative video?

Update: My posts on this thread are getting downvoted a lot, and I'm just stating facts! It seems I'm hitting a nerve... :D

greenfield14• 3 years ago

I'm not saying there is no price fixing, but this could also be explained by the supermarket chains all using the same suppliers (which is most definitely the case since the dairy market is not as diversivied as one might think; it's dominated by a few big players) and those suppliers already doing cut-throat price competition with razor sharp margins, meaning that if the slightest cost increase happens then it impacts all of them and once one can't take it anymore and raises by a few decimal percentage points, everybody else will immediately do that to.

Ever been to a gas station? That raised the price multiple times a day just like the other gas stations a few hundred yards away? Same principle. Doesn't need price fixing as explanation. They are just all buying the same raw product.

DrNosferatu5• 3 years ago

This is nation-wide to some 10 million customers.

For your alternative explanation to be true, it would require that all the 8 retail chains would have the exact same margin by natural, fair chance - and, cumulatively by fair chance, increment prices by exactly the same amount, at exactly the same time...

Better play the lottery.

moffkalast• 3 years ago

It's both. It's definitely both.

mardifoufs• 3 years ago

Weird because Portugal has had a higher inflation rate than the US in 2022 (8.1% vs 6.5%). The same is likely going to be true for 2023 according to projections and current data

https://economy-finance.ec.europa.eu/economic-surveillance-e...

scarab92• 3 years ago

Microsoft were blatant about this anticompetitive pricing strategy with Azure.

AWS used to frequently cut prices.

Azure started immediately matching the price cuts exactly.

The tacit message to AWS was don’t cut your price because we’ll immediately remove any competitive advantage you would get from doing it.

AWS largely stopped cutting prices after that.

s1artibartfast6• 3 years ago

If this is not price fixing, I don't know what it is. The regulators just whine and yawn.

Price matching is not the same as price fixing. Price fixing requires collusion. The distinction is pretty arbitrary but it is there.

If I announced that I'm raising the price 10 cents next week, and everyone decides to follow suit at the same exact time, that isn't price fixing.

HonestOp001• 3 years ago

Negative. In America, the labels set their prices, this was first brought to focus by Coca Cola. They had an issue where the stores were driving the price higher to increase margins. Coca Cola started the five cent advertising campaign where they set the price. You can see this with bread items here, they place the price on the bag / sticker / wrapping technology.

There was a push by the stores to allow them to discard what the manufacturer set the price to, but the courts said no to that. This was the appliance manufacturers effort.

Why the profit margins, governments make is so hard to compete with the established players through regulatory compliance, the incumbents can. I have not seen increased profits in my business, and I had to increase the prices. That was done because of input costs. The manufacturers may be making more because they have found costs savings due to input prices going down Or they increased prices to factor in future increases

pessus• 3 years ago

Honestly we should pass a law that all investments are locked for 2 years. Stock market should be used for raising money not speculative thing it is now.

wallstreet is forcing companies to show 20% yoy increase so companies will do anything to achieve that number as otherwise everyones money gets slashed by large percentage.

cjrp3• 3 years ago

How do companies raise money on the stock market without others speculating on their future value?

hello_computer• 3 years ago

Rest of the world has dollars lying around. Suddenly, several of their trading partners stop taking those dollars, throwing supply/demand for dollars out of whack. Execs would be foolish (and in breach of fiduciary duty) to not raise prices in such a scenario. After 78 years of pushing everyone around, it was bound to happen. Maybe transition from bully to neighbor, other countries will re-dollarize (it was a pain for them to de-dollarize in the first place), and things will come back into balance?

https://www.bloomberg.com/news/articles/2023-04-18/de-dollar...

jerome-jh• 3 years ago

It has been a long time I stopped reading news whose title uses some form of conditional. You should try, it saves a lot of time. OK I clicked though ;) just to notice the subtitle uses "might". Closed the tab.

Why is inflation so sticky? It could be corporate profits

Related Stories