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Comment by popctrl | Hacker News Reader

I've seen this asked on social media platforms and I'll admit ignorance on the matter, but this seems like a place to get better analysis.

What does it really mean when inflation is going crazy, but also many businesses are making really absurd, record profits? Is that a normal occurrence in periods of high inflation? It really feels more like price gouging than inflation to me, but like I said, I'm ignorant about economics.

How much inflation can be explained by the changes in the labor pool and government spending, compared to companies just charging more and hoarding more?

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This would not surprise anyone who lives in a country with a weak currency, like Argentina or Turkey. The currency is devalued and you earn more and more Pesos or Liras, but they are worth less and less. I understand that you live in the United States and that you are used to measuring things against the Dollar. So you consider the Dollar as something fixed. Now that your currency is devaluing, businesses income (and your income) is going to increase, but only nominally.

> Is that a normal occurrence in periods of high inflation?

Yes, even during stagflation. Inflation means the price of some things rise really fast, and profits grow together, while other things rise very slowly, profits go negative and the companies stop being measured on that indicator.

Besides, as a rule, inflation pushes earning into the things that are renegotiated often. That is most of the companies prices (they are renegotiated every time you go in a store), and almost none of the workers salaries.

> What does it really mean when inflation is going crazy, but also many businesses are making really absurd, record profits?

If a business' costs go up, they can raise their prices to maintain their margins.

> How much inflation can be explained by the changes in the labor pool and government spending, compared to companies just charging more and hoarding more?

If the main components are food and energy, then the things you listed are less likely to be the causes. Though energy prices could be a reflection (pre-Ukraine) of more economic activity generally as people stop staying at home and (e.g.) travel.

> What does it really mean when inflation is going crazy, but also many businesses are making really absurd, record profits?

That's...normal.

Outside of stagflation (which is exceptional among inflationary conditions, hence the special name) inflation tends to be positively correlated with economic growth which is positively correlated with profits

Inflation suddenly becoming an issue right around the same time that a rapid bounce back from the COVID slowdown took hold wasn't a weird coincidence.

Thinking inflation is positively correlated with profits is like getting punched in face is positively correlated with increased healing. Or Earth quakes are good for economy because they create more economic activity.

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