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Comment by StableAlkyne | Hacker News Reader

>The general inflation is of course due to reckless COVID spending and rising energy prices as well as reckless and ineffective sanctions.

Reckless spending played a part, but a major (if not the biggest) component was every company getting it into their heads to "test the price advantage" of their products. This amounted to jacking up prices knowing people would suck it up and buy, lying that it was "supply chain" forcing their hand, and simultaneously posting record profits every quarter for three years after the vaccine dropped.

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> Reckless spending played a part, but a major (if not the biggest) component was every company getting it into their heads to "test the price advantage" of their products

What makes 2022 so unique that just now corporations figured out they can raise prices? Why haven't profit margins taken off in 2022 [0] ?

These always struck me as bad explanation. Mostly hand waving. I think a more reasonable explanation is that increasing the money supply over 30% in a few years resulted in prices and asset levels going up ~30%.

[0] https://www.gurufocus.com/economic_indicators/62/corporate-p...

> What makes 2022 so unique

COVID was the omni-excuse. You didn’t have to say “we’re raising prices because we want to make obscene profits.” Instead, you could shrug sympathetically with the customer and say, “well, you know, times are tough. It’s hard to get the things you need, and we’re trying to get this at a price as affordable as we can… oh, also, hit the tip button on the screen from now on because our staff are working so hard through the pandemic and it’s so hard to find help (at the price we want to pay).”

Never underestimate a good story.

So why didn't profit margins go up to "obscene profit" level?

The article is arguing that they did through royalty fees.

I don’t know the answer, but I have noticed something clearly rather odd going on in the grocery sector/industry, an industry that was probably the least affected by the lockdown command economy than any industry and by far margin.

There is one niche but growing discount grocer that effectively has prices similar albeit elevated, from pre-lockdown prices, while other larger, mainstream general grocers have far higher prices, as measured by staple goods like eggs, milk, beef, chicken, etc.

Wealth extraction is pretty much what I expected the real reason was, and all the profits went to shareholders and was not put into the economy in any real sense (I'm going to preemt the pension fund strawman here).

You also see massive shrinkflation (e.g. you know buy 3 bags instead of 2 for a lot of products) which has the same result.

> component was every company getting it into their heads to "test the price advantage" of their products

This happens all the time. Companies are constantly maximizing greed. What allowed the price increases is the available cash (due to reckless spending). If customers hadn’t been able to pay, then companies wouldn’t have increased prices.

I hear this comment a lot and it’s like saying “bob didn’t die from smoking, he died from the giant tumor.”

Then prices will drop because without the infusion of cash consumers won’t be able to afford the inflated prices, right?

If the inflation is strictly caused by "corporate greed", and not by an expansion of the money supply, then yes, the prices would drop.

If the inflation is caused by an expansion of the money supply and "corporate greed" is merely the proximal expression of this, and central banks do not decrease the money supply as quickly and as much as they expanded it by, then no, higher prices are here to stay.

Time and reality will tell, no need to argue this out here with people who've already emotionally made up their mind and cannot be reasoned with through rational conversation.

I agree and I think we should start ore clearly distinguishing between inflation and price gouging. Both are going on, but when we blame everything on "inflation" we're really just letting the government be the fall guy and letting corporations off the hook for whatever increase they are doing beyond the currency's actual inflation.

Strongly disagree - the price increases were possible because people are strongly resistant to decrease their quality of life. e.g.: they'll pay significantly more of their income to maintain the same level of diet and travel up to the maximum they can afford (and beyond with debt). Rather than scaling back spending and reducing social status and leisure. This isn't even irrational, as status is linked to concrete health benefits (e.g.: Whitehall studies on cardiovascular health). There's been price matching across the food and service industries, due to consolidation and oligopoly - themselves a result of financialisation. So you have the whole food industry for example, responding to the supply shocks of covid by increasing price - then realising that demand elasticity doesn't apply if they act in unison.

> ...then realising that demand elasticity doesn't apply if they act in unison.

So you're not actually disagreeing?

You have companies like Kroger whose prices are out of control. One way to save significant money is to avoid them if you can.

If they have a competing grocer it is always drastically cheaper...free tank of gas per shopping trip cheaper.

They are salivating over this Albertsons merger. Easy money. Thank the gods for Walmart.

Consolidation and oligopoly aren’t new in the past 4 years. What is new is the trillions of cash injected into money supply.

Greed is constant. Consolidation started in the 90s and the same 4 grocery companies have owned the market for 15-20 years.

They only have ability to increase prices because consumers have more cash to spend. They would have loved to do this 5 years ago, but random $30k household income families of 4 didn’t get $16k handed out to them. (Two $2k/person stimulus rounds in 2020 and 2021)

This is happening cross nationally - and very few nations gave out covid payments similar to the US.

Side node - this is just a strange lens, for most people in Ireland (where we did receive covid payments) they were making up for work which had evaporated. Why is it always assumed to be additional to income in the US?

Not true actually. Many/most countries did massive increases in money supply. [0]

I don’t know exactly how each country compares to the US and was only using the US because of others in thread and that’s what I know best.

In the US it’s assumed to be additional income because you can measure money supply and see the increase. So it’s a correct assumption because there’s just much more cash. If it was replacement, then money supply would stay level.

Also, in the US direct cash payments weren’t need based. Everyone got them despite income or necessity. Personally, I stayed employed, got overtime, and got $8k+ in direct cash deposits. Just an anecdote, but everyone I know got similar payments. So it always seemed odd to me that yuppie programmers got wads of cash. The rationale made sense as they needed to help people quickly and qualifying would slow things down.

But this is a macro example of inflation drivers. So anyone with basic economics training would recognize this example. Arguing otherwise seems silly, without lots of evidence.

Corporate greed is constant and universal.

[0] https://www.investopedia.com/government-stimulus-and-relief-...

No, it doesn't happen all the time. Grocery prices are very sticky. Consumers notice when bread prices go up from $2.00 to $2.10, and they'll switch brands to avoid the increase.

That's why you get shrinkflation, small changes in quantity aren't as easy to notice as price changes.

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