Inflation is happening because corporations are realizing that they can just keep raising prices and people will just... keep buying things. Rinse and repeat.
Record corporate profits are the key indicator here.
Record corporate profits are the key indicator here.
I am open minded to the notion that corporate profits indicate the direction of "pain flows" in this economy dominated by inflation concerns.
The first question I would ask is: are current corporate profits breaking records in real terms, or just nominal terms ?
I don't know the answer to that.
It would be disappointing, intellectually, to learn that corporate profits are simply up in absolute, nominal dollars ...
... but I've been disappointed before.
Some things, people just have to buy. Can't stop buying food, paying rent, paying for your car, etc.
American economy has been putting the squeeze on these things for decades. Now we're going even lower on Maslow's hierarchy to food. Americans will keep paying though, there is no political energy or power in the population anymore.
Look at social media, if there's a narrative that's unflattering someone will create a large number of bots and shout it down in a way that distorts reflected appraisal signals. You see the same on here with anything that mentions certain keywords like China, central planning, socialism, etc.
Representatives already spend most of their time beholden to their donors after passing through the money filter, they may have sworn an oath but the most common form of incompetency is doing nothing, and worse if they're hopelessly corrupt.
If I get charged more interest, I simply charge more in wages/profit to cover it. Which I can do because there is a tight labour market/product market.
https://www.ons.gov.uk/businessindustryandtrade/retailindust...
For example, if you're a retailer selling pretty much anything now, your costs are up significantly across various different streams: your rent is up, your utilities bills are up, your logistics costs are up, the wholesale price of the products you stock is up... you have no choice but to increase your prices to stay afloat. That drives a spiral because now not only are your prices higher, you also have to raise your staff's wages because they can no longer afford to buy the products you sell, pushing you to increase your prices, and so on.
Now, you are a contributor to inflation through no fault of your own, despite the key increases in cost coming from, ultimately, rising fuel costs impacting across the whole supply chain.
I agree that record corporate profits are a key indicator (although probably this should be considered in context of inflation also, rather than just the raw dollar amounts).
This lack of real choice is hidden behind a plethora of brands all owned by the same large corporations.
And it turns out when there are like 4 large corporations that are responsible for almost everything produced in a market it's really easy to do de facto price fixing (in the sense that they [usually] aren't officially talking to each other but have unspoken ongoing gentleman's agreements) allowing all parties to get a nice share of the price gouging with no party triggering a race to the bottom.
Kimberly-Clark, Proctor & Gamble, Edgewell, and Energizer comprise like 90% of the pads and tampons you'll find on the shelves in an American grocery or discount store.
The largest shareholders of all of the above are the same: Vanguard, BlackRock, and State Street. Combined, they make up ~25% ownership of all of them.
Alternatively: firearms
For a while, Cerberus Capital Management owned approximately a majority of US firearms companies by production, including: Remington, Barnes Bullets, Bushmaster, DPMS, Advanced Armament, Marlin Firearms, H & R Firearms, Para USA, The Parker Gun, Dakota Arms, Tapco, and Storm Lake Barrels. All of the above were acquired by Cerberus from 2006-2009.
All of the above were folded into "Freedom Group". That was later rebranded as "Remington Outdoor Company", then sold piecemeal three years later (in 2020).
As a CEO, why would sharing 25% of shareholders with another corporation stop you from exploiting their weakness, increasing your market share, increasing your stock price and in the end, increasing your bonus? You're a publicly traded corporation, your contract is public, your bonus mechanic is public, these 25% don't have any other means of control over you.
Having them as a shareholder in common just means they are in the same index and has no impact on potential collusion.
If you're going to ignore the obvious problems with massive consolidation in areas like supermarket chains and virtually everything sold in those chains or the massive problems with consolidated telecomm/ISP companies and the de facto regional monopolies they carve up then I don't think you are arguing in good faith.
What keeps prices under control in any market is that somebody with supply capacity loses out and doesn't use that supply capacity - because the price achievable doesn't make it worth using that supply capacity.
That's the issue we have at present. There is insufficient spare supply capacity available to be brought online if prices go up. The solution is shifting consumption to investment, but at present the short term view is seen as more lucrative than the long term one.
It's a great question. Usually that competition is what I would expect, but I wonder if there are really the proper incentives in place for competing corporations to compete. I've speculated about this a few times in the past, but corporations ultimately are accountable to their shareholders. And it's increasingly common for their shareholders to also own shares of all their competitors, which is the whole idea of buying an index.
So, what is on one hand necessary and inelastic can also be a luxury.
Even things called 'staples' are flexible, you won't die of malnutrition if you don't eat eggs.
Which is exactly my point: either a rival corporation would be able to get market share via undercutting, or price increases are not actually that sensitive to consumer to begin with.
What I think is novel now is that there’s a lot more cash available to pay these higher prices.
Record profits are the result, not the cause.
> What I think is novel now...
Not novel. Just the return and normalization of usury.
Here's a brief recap, beginning with South Dakota's Gov. Bill Janklow dismantling of consumer protections from financial predators in the late '70s:
A Short History of Financial Deregulation in the United States [2009] https://www.cepr.net/documents/publications/dereg-timeline-2...
(Just the first useful hit I found. There are many, many such analyses. The worsening financialization of household debt has continued almost uninterrupted.)
Elsethread, u/Red_Leaves_Flyy notes some of the additional current co-factors. https://news.ycombinator.com/item?id=36237547
Chicken's come home to roost, and the pandemic happened after the Velocity of Money for the M2 had already dropped to nothing. Giving money to people and paying for their education was a last ditch effort after bank lending stopped in Oct/Nov 2019. The charts are all there for those that watch them.
We have record GDP. We also have record amounts of M2. If there were NOT record amounts of profit i'd be considered. Looking at absolute profit not charted against other metrics is embarrassingly stupid. Maybe profits are driving inflation to some degree, but saying 'record corporate profits are a key indicator' is just wrong.