An expense is always someone else’s profit. All inflation, all prices, everywhere, is the result of someone putting up their prices, trying to make as much money as they can.
If it’s not the retailers, it’s the wholesalers, the suppliers, the utility providers, the lenders, the executives, the land-owners, the unions and even finally the workers. All of them trying to make as much money as they can. All of them raising their prices whenever (and if) they can.
Greed is not an explanation, because greed is everywhere in the supply chain, right down to the bottom. The question shouldn’t be why they wanted to (since why wouldn’t they?), but why they could.
Examining which part of the supply chain put their prices up seems pointless unless it sheds light on why that part of the supply chain in particular could put their prices up.
So as workers/employees were asking for higher salaries the main message we heard from many was: "We can't do that because it will cause inflation". Now that there are articles that say inflation was in fact not caused by increased wages, it's suddenly not interesting anymore where the price increases are coming from?
It definitely is interesting, the issue is that the current inflation is causing a wealth transfer from wage earners to investors/capital owners.
That is interesting, because it destabilizes society and we should definitely look into where or who is profiting from the price increases.
>Now that there are articles that say inflation was in fact not caused by increased wages, it's suddenly not interesting anymore where the price increases are coming from?
You can ignore what your counterparty is saying in a price negotiation. There is no reason it has to reflect reality. Like when an employer says employees are a “family”.
There is just not enough competition any more. When you have only a handful of competitors in a market, even without collusion, its easy for them to all to just decide to raise prices at the same time.
I think you need significantly more competitors so that there is less chance for "accidental collusion"
What I really think will get be down-voted around here, but I think there should be state run (nonprofit) (but run at cost) offering in every market, and if the for profit companies can't compete against inefficient government run businesses then they should not be in business themselves.
We should leverage our collective power to set a baseline performance metric.
For example: Australia Post runs at a small profit rather than at a cost to taxpayers.
The problem is that if a really successful private business does compete, or many, then that takes away from the revenue the Australia Post can reinvest into its operations. Now in this theoretical scenario, Australia Post has a choice to make. Close shop, since the reduced pool of customers and thus revenue is not sufficient to fund its current worker pool. Or raise prices and innovate. Or operate at a loss (who does that?), or be subsidized by tax payers one way or another. And then you end up right back into the current state of economics, which is inevitable, and operates as its own organism and agenda.
I would think shipping to Australia is something any outside business would avoid given the cost of it being in BFE. So naturally a solution was implemented to keep its citizens happy. If it was as cheap to ship to Australia as it is to ship between borders, Australia Post wouldnt exist.
Yes, absolutely, its complicated. Do the state owned companies compete on quality or price? Are they required to cater to all segments of the market? How much of a loss can they take and for how long before they are closed down? Do you run separate orgs in each state and have them competing among themselves?
They are all hard problems, and its unlikely we would make the right decisions every time.
But I think its an interesting thought experiment.
In a way this would be like cap the % profits. And just like capping the profits… you cant do that because why should the super effective companies get punished and not gain massive profit!
There is a contradiction in our system - if the companies drive the prices down they digg their own grave. And since they have to grow not stagnate then at some point they need to stop driving prices down and also more and more fuck people over.
So it is greed. Imagine companies that wouldnt grow.
What you're saying is not unreasonable and not too far off of WTC anti-dumping laws. It deals, albeit at a national level, with corporations undercutting domestically manufactured goods at a loss to drive them out of business, only to drive prices up later.
You can optimise that by giving the competition authorities the power to initiate a public competitor if, and only if, there are price rises in a market.
This is a really interesting perspective, and made me consider what pushed me to inflate my own prices (my salary) especially aggressively the last few years.
In 2020-2022 my input costs (housing, food) went up ~20%, so I also needed to increase the price of my labor. This means negotiating a promotion or switching jobs, which is a lot of effort. And since I'm putting in that effort anyways, I might as well optimize it and try to get every extra dime, which ended being more than a 20% increase.
In non-inflationary periods, it's not even worth the effort and stress to optimize my salary like this.
I imagine the same was true for a lot of businesses in the supply chain. If you're some SAAS company, raising prices 20% requires renegotiating contracts, dealing with angry clients, etc. So if you're going to do that anyways you might as well try to raise it even more.
The reality is the entire world is feeling the brunt of the US allowing 40 years of unregulated monopoly and oligopoly building. When there are only two or three supplies of any given technology, they can directly or indirectly work together to increase prices because: what are you going to do to stop them?
By the time you can even begin to start building a competitor they'll just drop prices until you're bankrupt and buy up your assets for pennies on the dollar.
>When there are only two or three supplies of any given technology, they can directly or indirectly work together to increase prices because: what are you going to do to stop them?
How many highly qualified people are there in the world that would allow for more than two or three suppliers of things like EUV lithography and modern operating systems/browsers and other advanced fields?
Endless? The reason there is a shortage of a given profession for most jobs isn't a lack of talented people, it's a lack of job opportunities due to the aforementioned lack of competition resulting in fewer people entering the field. When you only have two or three competitors in a given field, they need fewer people to do the same work.
Do you think when T-Mobile acquired Sprint, it created more jobs than the individual companies for experts in cellular networks, or fewer? Do you think it's just a coincidence that after that acquisition was completed, T-Mobile immediately started raising prices?
There are certainly bottlenecks created by insufficient competitors resulting in insufficient pay to incentivize people, but at a certain level of expertise, there is also a bottleneck created simply because all people are not equal in their capabilities.
The T-Mobile example is irrelevant to the specific problem of there being very advanced fields requiring a ton of hard work that not all people can do, much less overcoming numerous real life obstacles like logistics of obtaining the necessary education.
Just to show how hard the problem is, you have a top down, well oiled dictatorship country with 1.5B people with a lot of purchasing power unable to reproduce the chain of knowledge needed to create the top end microchips after decades.
Your example reinforces the point that its lack of competition. If there were more competitors in the market, there would be more places to go with the tribal knowledge to build said products. Chinas problem is directly because of a lack of tribal knowledge as a result of intentional information withholding by other countries.
Maybe we all shouldn’t be greedy. Maybe profit as the objective is not the best objective. I’d like to see other metrics in the boardroom drive companies - social good, environment, data privacy, customer service (ha!) and so on… Not just “let’s screw out customers for an extra billion this year”.
Examining which part of the supply chain put their prices up seems pointless unless it sheds light on why that part of the supply chain in particular could put their prices up.
Excellent synopsis.
Price discovery is not perfect and not instantaneous. It often overshoots in both directions (see stock prices). And as you said, there is a constant upward pressure on prices as a part of profit seeking. It’s the downward pressure of competition and other factors that keeps it in check.
Inflation disrupts this equilibrium. It's not only profit that drives price increases, but also cost of goods, which can vary frequently.
There is a strategy in pricing as well - sometimes it makes sense to take a 10% price increase if cost of goods sold has increased 5% and is expected to increase another 5% in the near future, rather than take two separate price increases. Factors like that can cause an overcorrection which takes times to reverse if costs don't go up as expected.
The cause of the disruption is where the focus should be.
That's just not true. Costs can go up. Somewhat tangential point: Imagine extracting resources from the ground and at first it's cheap but as it gets deeper and scarcer it takes more and more person/machine hours to extract the same amount.
In this case at least some of the price rise is related to the fact that we created a bunch of money. The price of goods is correlated with the amount of money in the system divided by the aggregate number of goods being sold. If number of goods remains the same but more money is in existence prices will rise, especially housing in US which leads to higher cost of labor, etc.
Note I'm not saying that greed didn't play a role in certain places in the run up of prices, but only that greed isn't the only thing that drives up prices.
This has always been the case, and so the response to all bleating about inflation should be examining where the cause is rather than jumping to conclusions and only after that should policy be recommended and adopted to make sure it actually makes sense.
The research is examining where the causes are though? Excess profiteering by large energy companies being a major factor, feeding through to transport/shipping etc and impacting everything.
Inflation is contagious. Once it kicks above a certain psychological level, everyone starts increasing prices and people start accepting the vicious circle by over buying to avoid inflation on their savings. Which makes the situation worse and accelerate the circle.
But it’s easier to blame greedy corporate CEO than your own failed monetary policy.
Let's think about this. The moment COVID happened, gas prices went way down because there was too much production and oil storage has high cost. From what I understand, oil production was then ramped down to meet the demand. When things opened up, suddenly there was higher demand but it takes time for production to come up.
This seems to me to be a simple adjustment. The oil company's profits went way down the quarter the pandemic started, due to a sudden demand shift. Now they're going above average due to the sudden demand shift in the other direction.
Oil is also weird since it's heavily determined by geopolitics. The Ukraine war must have had an impact but I haven't looked into it
> Greed is not an explanation, because greed is everywhere in the supply chain, right down to the bottom. The question shouldn’t be why they wanted to (since why wouldn’t they?), but why they could.
Although I agree with you, I think there's something to be said for the late/post pandemic psychology.
Stocks were booming irrationally. Gamestop, Tesla. Crypto going wild. Unprecedented greed, not just among the big bad corporation, but literally gripping the entire nation. Savings rate had been up since early mid 2020(?) and seemingly every household was flush with cash. Professionals were job hopping for magnificent pay increases. Every 'pandemic hobby' had shortages. I paid $200 for a two leaf houseplant that now costs $30-$50 in 2023. A friend of mine paid hundreds to pre-order keyboards a year out from delivery, and the moment they were fulfilled secondhand markets would trade them at huge markups.
So then my question is: if you are a corporate worker living in this environment of greed, why wouldn't you explore price increases with greater than normal vigor?
I don't buy "big evil corporate" narratives but I do think America in general was engulfed by greed around that time
Many people made a lot of money during the pandemic whether by stock or government handouts. American savings rates soared during the pandemic. Many view this as a success of the child tax credit. That's one view. The alternate view is that COVID shutdowns depressed the availability and desirability of goods and services. Why keep up with the Joneses if you never see them? Entire industries were deemed dangerous and demand dropped...
Once things reopened, people started spending their savings. It's not that the tax credits and bailouts reduced poverty. It's that not having anything worth buying made people save their money instead.
But once things became available again, there was suddenly a lot more money chasing smaller numbers of goods (it takes time for production to ramp up). This leads to higher prices, and inflation.
As this goes on, people start demanding higher wages to keep up with price growth. Once that happens, price growth is fixed. No one's going to accept to a pay cut.
Real human behavior is influenced by a lot more factors than simple profit optimization. Psychology is not at the point yet where we could attribute exact reasons why someone made a particular decision at a particular time, but I suspect that in a lot of cases things like 'because (I thought) everyone else was doing it' or 'I thought about what <person or group> would say' would feature prominently.
>> An expense is always someone else’s profit. All inflation, all prices, everywhere, is the result of someone putting up their prices, trying to make as much money as they can.
Not true. For example, the current restrictions on the Panama Canal are increasing shipping costs because ships have to wait longer or go round Cape Horn. Its more expensive either way.
US government had about a trillion in deficits before the pandemic then spiked up to about 3 trillion in each of 2020 and 2021 [1]. That is a bump of 4 trillion dollars suddenly over those two years. The past two years seems to be about 1.5 trillion each and the inflation rate has decreased.
The theory is that printing money to spend leads to raising prices. Somebody gets that excess money so they can buy more of whatever they need, maybe start new projects or whatever and this bids up prices. Since this is not based on removing the ability for others to buy what they want (no tax increase) then the overall demand goes up. If you also have supply restrictions while spiking demand, it is natural for prices to rise dramatically.
This creates wage rising demands which, after much agony, more or less gets everything back at the same actual price levels though usually with a range of incompleted projects and a decent chunk of people impoverished while some got very rich. The particulars depend on whatever sector was inappropriately stimulated in the start of the process.
The Austrian school of economics is a good place to learn more.
Taxes are an explicit mechanism to say who the government is taking money from in order to give money to whomever they are giving it to. Deficit spending is an implicit way of taking money as determined by the market which means those with the least power are likely to lose the money.
The pandemic had about a trillion going directly to people. The rest went elsewhere.
There is also the issue of this is US spending versus global spending. Not sure what other countries did and also unsure how much the US dollar being the main global reserve currency factors into this.
This thread is a magnet for people who not only didn’t read the article but didn’t even read the headline, or are just continuing to generally repeat the same arguments despite the article contradicting them, without actually making an argument why the article is wrong.
That's a question that has interested me. I came up with:
We (the 99.9%) are not poor enough. We can still afford it "in some sense" and to some degree". The poorest, say, 30% shield the rest of a society from paying too much.
p.s. If you know this idea has some academic name, please lemme know!
>We (the 99.9%) are not poor enough. We can still afford it "in some sense" and to some degree". The poorest, say, 30% shield the rest of a society from paying too much.
It's not necessarily "the poorest [...] 30%". It's the marginal consumers who's willing to comparison shop and put in the legwork. They keep prices down for everyone else, by threatening to switch to the other store if one store decides to get too greedy. True, being poor might be correlated with putting the legwork into saving money, but wealth isn't the definite factor.
>p.s. If you know this idea has some academic name, please lemme know!
> The poorest, say, 30% shield the rest of a society from paying too much.
aka, it's too difficult to price discrinimate common essentials (lord knows they try - look at how much labeling of "organic" and "natural" foods there are!).
i think that there isn't enough competition. So many brands are owned by the same corps, supply chains vertical, largely same grocery store products/brands in Virginia as California. You can't just raise prices unless you have leverage over competition.
This administration's pro trust busting is the start of a change i hope. Efficient capitalism needs competition more than it needs efficiency of scale. The sad thing IMO is thatnsocial spending at the bottom is being used as a scapegoat, when increased demand wasn't the biggest player.
This combined with hyper-optimized inventory chains.
Even if there is a competitor, the max they could absorb would be a 10% increase in demand (look at what happened in toilet paper during Covid).
So, even if I comparison shop and buy from a different supplier, only 10% max will benefit and then the new supplier simply can't add anybody else--everybody left has to go to back to the inflated price supplier.
And that's only if some upstream supplier isn't a monopoly supplying the whole sector.
> The question shouldn’t be why they wanted to (since why wouldn’t they?), but why they could.
The reason companies can't normally just jack up their prices to sky high levels is because even if consumers can afford the increase they will feel cheated and refuse to pay or they will switch to lower priced alternatives who are happy to steal their competitor's business. That's why normally companies will usually increment their prices slowly over time. After a while they might lose the old folks who remember when the $1.50 candy bar only used to cost 50 cents, but to the younger generation the price was always at least $1 and they'll keep forking over more and more money for many years.
What went wrong this time was the pandemic. Initially, there were genuine supply chain issues that made goods scarce. Companies told consumers that their prices were higher and their goods were hard to find, but that it couldn't be helped because of the completely unprecedented circumstances we were all dealing with. "We're all in this together!" corporations told us, and so while nobody was happy about the increasing costs, we were understanding and forked over the extra cash. Things were difficult for everyone after all. We knew some companies were having a hard time.
As the pandemic went on people's stress and anxiety levels increased. With their routines and lives disrupted, and their options limited, people were desperate for some familiar comforts. For the sake of their mental health they were willing to go into debt to get them if necessary. Because of this, people were willing to spend more to get what they wanted (and in some cases needed). Household debt hit record highs at the end of 2021. Companies realized this and took full advantage. Price gouging and colluding out of pure greed, while still assuring consumers that "We're all in this together! Don't blame us! Pandemic! Supply Chains!" They kept jacking up prices and complaining to the public about the supply shortages while at the same time there was a "warehouses crisis" because they were sitting on massive amounts of unsold goods. They could have lowered prices to sell off surplus stock, but they just kept jacking them up while building new warehouses to store their inventory. They could afford it after all since they were making money hand over fist. Warehouse construction was the only sector of the construction industry that was booming at the end of 2021.
Then word started getting out that companies were lying to us. There were headlines reporting massive corporate profits while many consumers were struggling to pay their bills and keep a roof over their heads. Some industries got more attention than others (https://www.reuters.com/business/meat-packers-profit-margins...), but many people were starting to realize that they'd been being taken advantage of when suddenly the next major excuse hit.
The news was full of reporting on massive inflation, that prices were rising and how it was "hurting" businesses. Consumers again, were primed to expect increased prices due to something outside of the control of the companies. "We know prices are high right now, but it's not our fault, it's this damn inflation!" the corporations insisted. "We're all in this together!" they said. That line of bullshit actually worked again on a lot of people. Even here on HN you could find people defending the companies and insisting that it wasn't greed.
Because supply chain issues and "inflation" hit everyone and companies colluded together to rise their prices, the prices of all goods by all companies rose at the same time and so even the people who didn't buy the lies about companies being powerless against inflation were left with zero lower priced alternatives to switch to. Every product from every company was more expensive.
This isn't the first time companies were able to use excuses to jack up prices unfairly. Years ago, when gas prices soared to record highs many companies raised their prices and told the public "We can't help it! Don't blame us! Gas prices are costing us so much more now! We're all in this together!", but when gas prices finally fell they didn't lower their prices back down. They instead increased their use of tricks like shrinkflation to fool customers into thinking prices weren't as high.
(1) The majority of companies expected their input costs to rise so quickly increased prices to compensate, when they didn't rise as much as expected they slowly lowered prices to remain competitive. Since nearly everyone was reading the market the same way, they weren't punished for this.
(2) Companies became really greedy a few years ago, and increased prices just because they could. Recently they have been less greedy, and prices have come down.
I lean toward (2), and I think we have strong evidence for this in the form of 'shrinkflation', where firms redesigned their packaging to provide less product while maintaining prices or brand identity (eg making the packaging appear to be the same size while having lower product weight/volume). The fact that changing product packaging requires a significant investment in adjusting production lines says to me that it was a proactive decision rather a simple reaction to market conditions.
By contrast, eggs went up quite a bit a couple of years back due to a combination of increased demand and a coinciding outbreak of avian flu. But while one could feed chickens less or selectively breed for smaller eggs, the actual manufacturing of the egg is basically up to the animals rather than the accountants. If you crack open a fresh egg you pretty much know what you're getting and it isn't easy to change. It's not feasible to sell cartons with only 5 or 10 eggs rather than the more common amounts of 6 or 12 (or 30 if you have an insatiable appetite for them as I do). So there normal forces of supply and demand have reasserted themselves and prices have (somewhat) returned to where they were a few years ago. It's been easier to observe changes than for items like beef which I buy more intermittently.
It's amusing to point out eggs as some kind of holy grail of how price moves naturally, when the two largest egg producers (Cal-Maine Foods and Rose Acre Farms) were just fined in federal court for price fixing.
That's interesting and sort of amusing, but I didn't notice as I buy from fairly small farms.
It's not that I think eggs are immune to price fixing, but rather that the packaging of fresh eggs isn't easy to change; the eggs themselves can't be altered and while you could sell fewer of them per box consumers (in the US at least) are used to multiples of 6 and would immediately notice. In contrast you could reduce the volume of, say, detergent but redesign the container, and many consumers might not notice that they were getting 6-7% less.
What I'm getting as is that while the causes of egg price changes might be legit or greed, it isn't as easy to hide the price changes from the consumer as when you operate a whole production line and can alter the appearance and volume of the package itself.
You don't even need to redesign (resize) the packages (boxes, think laundry detergent or cereal). Just fill them up with 5-10% less and only change the printed weight/volume. If the package doesn't transparently show the product inside it's not as obvious.
Because they're such total dicks, here are some Cal-Maine brands I go out of my way to avoid when I get eggs in stores:
4grain cage free
Egglands Best
Farmhouse Eggs
Land O Lakes
Fassio Egg Farms
Rocky Mountain Eggs
Red River Valley Egg Farm
Meadowcreek foods
Specialty Eggs Inc
Southwest Specialty Eggs Inc
ProEgg Inc.
American Egg Products Inc.
Texas Egg Products LLC
Wharton County Foods
Benton County Foods
Sunups
Sunny Meadow
They're just the ones who got caught. A lot of markets have only 2 or 3 major players. With so few players they could cooperate to raise prices without doing anything more than observe what each other are doing and responding accordingly. Price being the only means of communication or coordinating between the players.
Kelloggs, General Mills, and Nestle hired lawyers that appealed to populism to convince jurors that egg producers price fixed with a probability of at least 51%. That's hardly proof of price fixing.
> finding that the egg suppliers had exported eggs to cut supply in the US market, as well as limiting the number of hens, reducing flocks and killing chickens earlier than they usually did.
It was sufficient proof to convince a full jury, which makes them guilty of price fixing. They can certainly appeal, that's how the court process works. It's how all trials in the US work.
Also, I have to take issue with the insinuation that these egg producers are the underdogs with a small business budget for lawyers themselves. They're the largest egg producers in the US with billions of dollars worth of assets.
> > finding that the egg suppliers had exported eggs to cut supply in the US market, as well as limiting the number of hens, reducing flocks and killing chickens earlier than they usually did.
Going back to your prior comment:
>It's amusing to point out eggs as some kind of holy grail of how price moves naturally, when the two largest egg producers (Cal-Maine Foods and Rose Acre Farms) were just fined in federal court for price fixing.
I mean, prices did move naturally. The egg producers reduced supply and price went up "naturally". In the case of covid "greedflation", you don't really need an explanation to explain the reduced supply and/or increased demand: covid and stimulus checks explain the situation pretty well.
> It was sufficient proof to convince a full jury, which makes them guilty of price fixing.
Sure, but it's still the lowest burden of proof. My point isn't to make Cal-Maine the underdog. It's to point out the irony that anticapitalists will suddenly trust capitalists 100% whenever they say something that agrees with them, regardless of the motivations of such a claim. It's like when people use Microsoft's antitrust lawsuits as evidence as that all billionaires can't be trusted, yet they're completely uncritically accepting arguments made by lawyers who represented other billionaires.
Of course the market is perfectly efficient, but 90% of the time it is, especially for commodities like eggs. It may be the case that this is getting worse, but no it is not possible for companies to suddenly decided to be greedy in 2021.
> anticapitalists will suddenly trust capitalists 100% whenever they say something that agrees with them
This seems like a twisting of the facts.
First of all, one does not need to be "anticapitalist" to believe that price-fixing is bad.
Second of all, it's less that we will suddenly "trust capitalists" and more that when you've got an actual trial in our actual justice system (whether civil or criminal) and solid evidence can be presented to prove that one set of capitalists was acting in bad faith (that just happened to be in a way that happened to hurt other capitalists as well as regular people)...
...it holds much more weight than just "someone saying something", whatever preexisting biases it might agree with.
If you have so much faith in civil jury verdicts, then do the previous lawsuits against egg producers where the jury found them innocent disprove the conspiracy [1]?
Afaict, there was no direct evidence of any conspiracy. The egg producers were exporting more eggs and giving chickens more room. The former can be explained by market conditions and the latter can be explained by pressure from animal rights organizations.
This is completely unrelated to the lawsuit which was about activity that occured decades ago. None of Cal-Maine's chickens contracted bird flu, despite being the largest egg producers, so they likely are better at protecting their chickens from disease than their competitors. Why shouldn't they be rewarded for this?
Somewhat unrelated to the old lawsuit, but not entirely since they're being accused to the same behaviors. There have been calls for the FTC to investigate them for "price gouging, price coordination, and other unfair or deceptive acts" (https://farmaction.us/wp-content/uploads/2023/01/Farm-Action...)
It's beyond absurd to suggest that Cal-Maine deserves a "reward" of > 700% profit for their chickens not getting a disease. I can't even fathom your reasoning there. Their "reward" should be "having plenty of eggs to sell when some of their competitors don't" not record high price increases for no reason in the middle of a global pandemic where household debt is at record levels and families are struggling to keep food on their tables and roofs over their heads.
They didn't make $7 profit for every $1 in costs. They made 700% more profit than the previous year, bringing it to about the same profit margin as Apple for a year. Do you think that Apple should be content with having plenty of iPhones to sell? Why shouldn't egg producers be allowed to have the same profit margins as tech companies?
> You can get by without the latest iPhone. How long will you last without food?
So you deserve more money for providing a luxury instead of a necessity? Limits placed on how much you could profit from food never made food cheaper. It has discouraged people from providing food.
Shrinkflation is hardly a new phenomenon. There is no evidence to indicate that firms were less greedy a few years ago.
Temporary high egg prices were at least partly caused by a temporary supply shortage from a bird flu outbreak. That was somewhat different from the monetary issues which usually drive inflation.
I don't think either of those theories is right. (1) doesn't explain the rise in corporate profits, and (2) is of course silly.
Here is my theory:
Consumers generally have an "acceptable" price range in their head for each product. When most retailers have prices within that range, it is really hard for a single company to raise prices above that range, as they'll lose a lot of business. But, COVID forced input prices to rise and fluctuate quite a bit. Once companies raised prices to account for input costs, consumers lost their sense of "normal". Then, companies were able to get away with charging prices even more, and could get away with raising prices above their competitors without losing any business.
Actually, I think it's a little different. During the pandemic personal savings rates exploded and credit was extremely cheap. Companies realised that customers had plenty of cash in their pockets so could afford to raise prices without the demand destruction you'd typically expect so they did.
You're right in the sense that this idea that corporate psychology just randomly changed over the last few years makes just as little sense as saying customers skimping and building up savings in 2020-2021 contributed to inflation in 2022.
For many years, consolidation, deregulation, and other factors have led to a gradual but marked decrease in genuine competition in all sectors. As long as things were still trundling along as normal, the people at the top didn't really think about this too hard.
Then COVID came. Between supply shocks, lockdowns, and various other temporary effects, we were told to expect inflation. Indeed, for a time, there were genuine, honest-to-god price spikes rippling through the economy directly because of the pandemic.
But the causes of those spikes subsided.
And the prices didn't come back down all the way.
The people at the top realized that, because of how much we were all being told to beware of inflation, they could simply make the inflation happen and pocket the extra, and no one would notice.
And for...I forget exactly how long, but well over a year, at least, the public broadly didn't notice.
Now, we're noticing, and trying to make clear that this is what's happening.
But people like you are still trying to act like this is impossible, companies can't really cause inflation purely by raising prices, that would be ridiculous, this is purely the aforementioned price shocks (that ended years ago, while the inflation didn't).
Wow, really? Different here in Australia, petrol is $5.50/gallon ($2.2 per litre converted), batteries I don't know, but EVs are crazy expensive. And housing is absolute madness, Eg Sydney median house price is something like $1.125M AUD ($740k USD). So the price drops seem to be delayed here I guess..
That may be the median for all dwellings including apartments. The median detached house price is closer to $1.4m AUD in Sydney at the moment. Grocery prices are still near record highs, petrol has come down slightly but give it a week and it’ll be back up with our cycles, and products are still being shrunk in dishonest ways.
Still waiting to see the ‘prices come back down’ from the parent post, meanwhile our main shopping companies all posted record profits.
Surprising, where I am in Canberra, I never see it below 1.99 AUD/litre for the cheapest ethanol heavy stuff, but at my local nearly always see it above $2 AUD. But I don't get fuel that often so maybe I've just missed the drops.
Ahh, just realized $1.3 USD is about $2 AUD or ~$5.1USD/gallon, so yeah that tracks I guess.
I'm not sure about batteries but gas/cars/homes are still WAY up from where they were about 4 years ago (wow, it's really been that long :P ) They've just ticked down (slightly) from their peaks.
companies are always in maximized greed mode, governments are blaming them for stupid monetary policy and poor handling of COVID which resulted in tons of supply chain issues that allowed smart companies to maximize profits even more
The whole "greedflation" narrative still doesn't seem plausible. Why wouldn't one company reduce prices and capture the market share from the companies that artificially raised prices? In order for the "greedflation" to work, there must be some collusion in terms of price setting. This does happen in the market, but it's illegal and governments do take action against price-fixing [1]. A much more plausible explanation is that the economy as a whole had a massive rebound after the pandemic, and the record profits are just a byproduct of that rebound.
Because real markets are not as simple as the toy ones of price theory in economics classrooms. There are transaction costs to entry and exit, information is highly imperfect, products are often not that fungible, inelasticities of both function and consumer preference abound, and nominal competitors often tend toward cartel behavior because many producers see themselves in a somewhat adversarial relationship with customers, and consider the true competition to take place in the corporate finance marketplace rather than the retail one.
Not to mention that they really are cartels. According to Oxfam international only 10 megacorps control the majority of top brands (1). It may look like there's lot of competition for say cereal, but there's basically just General Mills and Kelloggs with a few generic brands available.
> the true competition to take place in the corporate finance marketplace rather than the retail one.
This hits the nail on the head. There is no secret cabal of colluding business owners, but for any company that is public, they are necessarily “colluding” to keep share prices high. Since they are all optimizing for the same thing, it makes sense that they would take similar approaches.
Elegantly put! This is where the glorification of 'shareholder value' has got us; it's very unfortunate that commitment to other values like employment security or product quality are considered bad management in mainstream business thinking.
No doubt markers are imperfect, and they can't respond to changes instantly. But that's way more vague than the "greedflation" narrative. The idea behind greedflation is that companies are systematically overpricing products, and no one is undercutting them because... (insert explanation here).
What that explanation is, nobody really seems to offer a good reason. Collusion is always a possibility, but there's strong disincentives for it. And it'd have to be a huge number of companies that are all colluding. There are much more mundane explanations, such as record spending. Is it really that surprising that record profits are made in a time of record spending?
No one is undercutting them because they are raising prices and taking the profit, too.
It's not "collusion" in the sense of "fat cat execs in a room all explicitly agreeing to do nefarious things." It's just an alignment of incentives, a zeitgeist, and a common recognition of an opportunity to make a shitton of money without any real consequences.
You might have noticed that we had something rather significant going on during that time—a global pandemic? With major associated economic, logistical, and personal disruptions?
My point exactly: the pandemic and associated events (namely, supply chain issues and massive influx of money) led to the price increases. Not "greedflation".
No; as I explained in the linked post, they changed the conditions, which allowed the companies to continue raising prices (and refuse to lower them) even long after the actual supply shocks were over.
...Alongside the other, more gradual changes, which (as I explained in the linked post) weren't fully noticed or appreciated until the shocks of the pandemic.
Really, I explained the full sequence of events very clearly in the linked post, and simply repeating "it was just the supply chain issues, no greed involved" does nothing whatsoever to refute what I said there.
What conditions? Your post ultimately does boil down to "companies realized that they can just raise prices and make more money". Completely absent from this narrative is a reason why they couldn't have raised prices earlier.
Of course there are reasons why: the supply shocks during the pandemic are largely resolved, but there's still pent up demand. That, and a massive influx of cash that enabled consumers to pay those high prices. But this isn't "greedflation" this is a completely expected outcome of interrupted production and a large increase in money supply: more money to spend, but fewer things to buy, leading to high prices.
This is a great answer. In particular, demand in general likely became more elastic during COVID, as consumers suddenly had more cash on hand. In that case, a single firm could raise prices without decreasing quantity demanded too much. That would have caused other firms to follow suit.
The assumption of defecting against a cartel by lowering prices also requires that the defector have more supply, but supply was restricted during COVID, so it stands to reason that defecting wasn't possible in the short run.
I’d also add that pandemic supply chain disruption meant that consumers were more accepting of limited choices initially or assumed prices would recover.
We saw that especially badly with the auto industry, which used the chip shortage to push people to buy more expensive models. Lots of people figured they didn’t have a choice so they bought what the dealer had available, especially before interest rates made it easier to not think about the difference. In 2019, fewer buyers would’ve put up with that because they’d assume the model they wanted would be available soon.
> Because real markets are not as simple as the toy ones of price theory in economics classrooms.
If the experts in academia who spend their lives studying this stuff are so off the mark, how is it that you have more knowledge of how things "really" work?
Where did you learn the things that drive these strong opinions?
Do you believe that economics theories ignore the market forces that you're discussing?
That fundamentals like supply, demand and consumer behavior are less relevant than "cartel behavior"?
I guess I'd just like to understand what you're basing all this on.
Oh I'm not claiming that, I have a lot of respect for professional economists. What I mean is that most people's understanding of economics is very superficial and limited to toy models, in part because a few populist/pundit 'celebrity economists' oversimplify the topic to make easy money.
I'm reasonably sure that academic economics theories are an attempt to drive, to dictate how "things really work"
because that's what academia does and they know it. Academics talk about how to impact the 'next generations' of leaders all the time
economics are no different. e.g. today somebody studies economics and learn some theory about how stuff "really works", in 5-10 years they're a congressperson or some other high-ranking executive deciding what to do based on the theories they learned
so academics being off the mark means this plan as I very roughly outlined failed. reality asserts itself in spite of the wishes of a few corporate overlords
Until you get into grad school basically everything you learn is so simplified that it's functionally a lie. Pointing out that drawing a big X on a blackboard with the intersection labeled price is not actually how the world works is not setting yourself above economists.
I mean christ, if that was all there was to it what the hell are those experts doing spending their whole lives studying this stuff?
Drop your prices and maybe you capture more of the market. Works best if your product is a perfect substitute and consumers will both (a) immediately know about the drop and (b) be able to switch immediately. And then you can capture some of the lost per-unit profit in volume... but just how much market share would you have to capture to come out ahead of just cruising along with higher per-unit pricing and being more profitable as-is thanks to your costs dropping again? How much would you need to spend on advertising to get the message out, and how does that effect how much you need to capture?
And if it doesn't work, and you lost your margin without gaining enough to make it worth it, do you want to have been the guy in marketing who was pushing for the price cut? At this point yo-yo'ing the prices back up is gonna piss off the customers you do have once again, so you might be a bit stuck for a while.
Add in things like customer loyalty, stickiness, and habits, and "let's try to send the trend in the opposite direction" only looks riskier and riskier. For instance, if Walmart dropped their prices 10% how many Target shoppers do they convert who wouldn't already be going to the usually-cheaper Walmart?
There doesn't have to be anything nefarious going on to explain how markets can result in the consumer losing out, especially after shocks to the system. Let's say everyone was worried that customers wouldn't stand for 10-20% price hikes, but now that they've learned that they can, in fact, get away with it, they independently think it's easier to stay where they are then to try to get into a race to the bottom. No collusion, no "evil" cartoony-levels of greed, but no effective market pressure to fix it immediately either.
> but no effective market pressure to fix it immediately either.
this pressure comes from the consumers. If the consumers keep opening their wallets, then there would be no pressure.
So for prices to drop, all that is required is for consumers to stop purchasing. Unfortunately, people, esp. in the US (but basically all over the west too) are quite rich, and they rather spend even if prices are high.
Elaborate? I've already explained that price-fixing does sometimes happen, but it's illegal and governments do crack down on it. People like money, but they also like to stay out of prison and avoid losing that money in settlements.
If anyone is making a just-so argument, it's those claiming "greedflation". The idea that record profits must equate to something nefarious happening is in my view a simplistic just-so statement. At least in America, people built up record savings during the pandemic, and then spent those savings in record numbers once the lockdowns ended. Record profits during a period of record spending seems rather unsurprising, doesn't it?
It's not price fixing. It's what's stocked by big retailers.
Real world example.
Heinz Baked Beans, UK. There are tons of other baked beans brands, but almost every store has Heinz. It dominates the shelf space by a huge margin.
Heinz is specifically called out in the article. They've made massive hikes in price, everyone's complaining about it, but often it's the only product on the shelf for a common, quick meal ingredient in UK meals.
There is no choice. It's not a simple economic choice. Most people can't choose the cheaper brand as often there's no choice.
Heinz Tomato Ketchup is/was in an even more dominant position. Many mid-sized grocery stores literally only stocked Heinz. (the co-op one is a pretty good substitute btw).
While theoretically there is consumer choice in the market, the reality is that it's wasn't true unless you want to go round a bunch of different shops.
In the long run Heinz has done some serious damage to their brand, but short/mid term are making juicy profits as the market is so slow to correct due to the way supermarkets work. How shelf space is allocated. By how the industry has become a small amount of ridiculously large companies hiding behind a patchwork of acquired brands.
If Heinz is the only supplier of baked beans, that is literally just a monopoly. In that case you have a monopoly problem, not an inflation problem.
Do you all not have private label brands? I’ve never been in a UK grocery store but it is hard for me to fathom that you would only have one brand of baked beans, given it is a food regularly consumed in the UK (or so I’m led to understand by the abomination that is beans and toast).
You misunderstood me slightly. It is not the only supplier. It is just the vastly dominant brand on the shelves.
We have a few supermarket brands that have taken over every town and village local store.
As space is constrained in those stores (long story to do with Sunday trading laws), they stock one, two or three brand of lots of different items. Like there's one choice of poppadoms. Or one brand of english mustard. And one brand of Dijon mustard. Etc.
So the stores have a wide selection of goods, but a shallow selection of each individual good.
In the case of baked beans, you will always have Heinz. You might have one other choice, depending on the supermarket brand. Often the other choice is cheap, and nowhere near as tasty.
Bigger stores have more choice.
One noticeable change is that co-op didn't used to bother stocking their own brand ketchup in smaller stores. It sold so poorly Vs Heinz it wasn't worth the shelf space. That has changed, and I'm sure other super markets are making similar changes. For context Heinz has decided on a ridiculous £4.50 a bottle, while the Co-op own brand is £1.90. Heinz used to be about £2.50-£2.90ish I think before the greedflation.
>In the case of baked beans, you will always have Heinz. You might have one other choice, depending on the supermarket brand. Often the other choice is cheap, and nowhere near as tasty.
>Bigger stores have more choice.
So why isn't there a brand that's cheap and tasty? Does Heinz have some sort of proprietary bean tech that others can't replicate? Is there a fundamental trade-off between tastiness and price?
In many cases—yes, there is a straightforward tradeoff between taste—or quality, more generally—and price.
In particular, with most of the cheapest mainstream brands, they've spent years finding the cheapest they can produce the product for that customers will still accept.
Basically, if the beans could be made tastier, while still being that cheap, Heinz would have done that already, leaving no room for a competitor to do so.
Maybe y'all weren't paying attention when your economics 101 professor said that basic macroeconomics describes general economic behavior, and there can be a lot of other factors?
And how about the fact that at least in the US, we don't have a free market system?
Yeah maybe it does and maybe it doesn't. Do you have any theses to add instead of saying "maybe no?".
A data point to support the original comment is that there are arbitrageurs all over the place. If you are trying to raise your margin, lots of people without any technical or product knowledge will simply buy it cheaper else where and drop it into your margin and eat your lunch. See the whole drop ship economy phenomenon.
But a smart player would slightly undercut the competition and gobble up the market share. If each player acted independently, that is what would happen. There does indeed need to be some sort of collusion to prevent one player from playing the optimal strategy.
The factor that the greedflation proponents seem to ignore is that people were spending in record numbers after the lockdowns ended, and people spent the money that was saved in record numbers. This is reflected in GDP figures. There was a huge drop in 2020, followed by a massive spike in 2021.
> But a smart player would slightly undercut the competition and gobble up the market share.
You assume "slight undercut" => "gobbled up market share" but this is hard to substantiate.
Any grocery store in the US will show you examples of name-brand products next to slight-undercut store-brand alternatives where many people continue to buy the name-brand one, despite the price difference being super obvious every time the purchase is made. Real markets aren't econ 101.
Prices go up much more easily than they go down. https://www.investopedia.com/terms/p/priceratchet.asp In many markets consumers aren't perfectly evaluating the options from scratch on every single purchase with price the only factor, and a company doesn't want to have to accept a drop in price any more than an employee wants to have to accept a salary cut. So prices go up much more easily than they go down, since they can get forced up but require someone to take a gamble to get them to start moving down.
Name brand products are often perceived to be superior (whether or not that perception is warranted, is it's own topic) so no doubt they can command a premium. Mercedes vs Honda. I've ridden in plenty of Hondas that are just as comfy as Mercedes, but the fact that the former commands higher prices is not price fixing or "greedflation".
Prices tend to go up because inflation is much more common than deflation. That I don't doubt. But the narrative behind "greedflation" is that something other than market conditions are causing inflation.
Two possible reactions to a competitor raising prices:
* let's not raise our prices and try to gain market share
* let's do the same and see if we can all just bring in more top-line revenue
Two possible actions when your costs go down compared to your current prices, but nobody has lowered prices:
* let's stay where we are, no need to be the first to make a move, we have nice fat margins right now
* let's get aggressive and lower prices
These are all rational actions. A "greed" aspect of inflation only requires most players in the market to take the actions that keep their prices higher.
The high-school-econ level common belief is that companies will predominantly choose the "let's go for more competition!" price move. But ... why? Competition is stressful and higher-effort than coasting and maintaining the status quo, especially when your profit margins for the status quo are now healthier than they were 4 years ago. Especially since it isn't guaranteed to work out financially better for you.
The "invisible hand" is limited in terms of forcing players into the price-cutting competition unless people are so broke that they can't keep going. But if it's the difference between saving 5% and saving 6% of your income, or the difference between putting an extra $100 on your credit card debt every month or an extra $110... there's no overarching benevolent force here that should make you think companies won't be as greedy as possible.
The "anti-greedflation" argument you're making is basically just "they would lower prices if they could" and that's patently false for the vast majority of products in the vast majority of transactions. They will avoid lowering prices until there's no alternative.
Mercedes being more expensive than Honda is not an example of "greedflation" - it's an example of consumers making decisions on other things than the instantaneous lowest price". And in a world where you agree that consumers aren't always motivated by price, you should see how that extends to "price wars won't always result in the instigator being guaranteed to win significant market share" and* sellers not always being motivated to favor market-share over all other metrics.
> where many people continue to buy the name-brand one
presumably those people are acting irrationally. Or the name-brand ones do provide more value for them.
But hearsay from various news sources have mentioned more and more of the generic/store-brand goods sales are up. So i don't believe that people actually will continue to buy name-brand stuff that is of the same quality as the store-brand.
They didn't have to call up their peer. I feel like I'm going crazy everytime I read, "but that not how macroeconomics works!!!"
WE LITERALLY WATCHED IT IN REAL TIME. Covid caused supply chain issues, unaffected supply chains independently raised prices because people were willing to pay it. Trump was dumping $8T into the economy, business leaders also knew that. The supply chains started to clear up, but demand wasn't waning despite high prices. Throughout the entire thing anyone sitting on investor calls was hearing "highest profits in company history" over and over again.
Almost as if all that sociology about people behaving coherently without direct communication might have been on to something.
> Covid caused supply chain issues, unaffected supply chains independently raised prices because people were willing to pay it.
But that's not "greedflation". That's literally a normally functioning market. If Company A and Company B produce a largely interchangeable product, and 50% of Company A's output is lost due to shortages both companies are going to sell their products at a higher price point. The fact that Company B's output was unaffected doesn't change the fact that their product is now in more demand due to Company A's production shortfall.
After the supply chain issues eased, people had loads of savings from the lockdowns. This is a big reason why companies were seeing record profits in the post pandemic period: because people were spending in record numbers. Is it surprising to see record profits in a period of record spending?
“Greedflation” would be when those companies kept prices up after their supply chain had returned to normal. Competition will chip away at that but that’s going to be slow if you’re in a market with only another megacorp trying the same thing.
But has demand gone down? The gummed up supply chains created a lot of pent up demand. It's going to take a while to satisfy that demand. Compounding this, pandemic checks injected a massive amount of dollars into the economy [1].
It's simplistic, but take this analogy. A factory builds 1,000 doodads per year. COVID shut it down for a year. Then after COVID it starts producing 1,100 doodads per year. It's going to take 10 years to satisfy the pent up demand. Of course the real world is more complicated, but the fact that prices remain high after the supply chain issues are resolved isn't at all indicative of nefarious or anti competitive behavior.
There's been over a year of quarterly earnings calls where executives have told investors about falling supply chain costs and when asked if prices would drop have laughed.
Trump also slashed corporate taxes and taxes for the ultra-wealthy, which certainly didn't help.
Yeah there was even a video compilation circulating (posted here IIRC) of recent earnings calls where the CEOs all said "blah blah great opportunity to increase prices". Surprising to read comments in here that seem to hold a sentiment along the lines of "companies are just doing what they gotta to get by".
I do find it fascinating that a world-leading economist could have findings in a peer reviewed study, and a random joe will reject it and be like "that's not how free market works!"
> illegal and governments do take action against price-fixing
You mean like how egg producers engaged in collusion in 2000's and the were founds guilty in year 2023, 20 years later? You do realise that it's too little, too late.
Greedflation is a new word for monopolism. It not a monopoly or oligopoly this time, it's a more intricate network of multinationals, financial sector and govt.
Best thing we can do is start worker coops to serve our basic needs, and somehow vote law into place that makes worker coops more tax friendly than private limiteds (and related forms of business ownership).
> Why wouldn't one company reduce prices and capture the market share from the companies that artificially raised prices?
I feel like the answer here is probably along the same lines as the ‘because we have a good excuse’ line of thinking that caused the massive wave of layoffs a few months ago.
What makes "because we have a good excuse" more plausible of an explanation compared to the straightforward one (ie. "macroeconomic conditions have changed, money has gotten scarcer, and the management and/or shareholders are reacting accordingly by cutting costs and increasing prices")?
I’m not really sure if it’s more plausible, but it seems likely that at least part of the reason would be “all our competitors are raising prices without any ill effects, so we should too”.
I don’t think those large mammoths would go for something uncertain like ‘potentially capturing more market share’ if they have the option of ‘guaranteed increase in profits’.
It's as simple as consolidation... If there is only 1 or even 2 companies in an industry, both are probably shitheads, and it doesn't pay to be the loss leader, otherwise you may end up gobbled up, you both grab what you can while possible.
Which is already what happens pre-covid. There's zero change in corporate pricing strategy - the cost increases are all due to monetary policies interacting with the covid shocks (that is still reverberating).
When inflation happens and then goes back down, prices remain high unless DEFLATION happens... this "study" and article are just proclaiming a specific anti-business worldview without actually looking at the true cause... most governments printed trillions of dollars of their currency during the pandemic and the currencies are forever worth less than they once were.
As someone in the industry my experience was sudden insanely high shipping & container costs and an inability to get stuff out of port while storage fees added up. Of course prices for goods had to increase to support these sudden expense increases. You literally could not get containers at all at certain points during the pandemic.
My company, and I suspect others as well, were cautious about reducing prices as shipping costs eased. Which has contributed to their healthy margins but others are finally starting to lower their prices as well which is now causing us to do the same.
Because we all know corporations were keeping prices and profits low before COVID because it's good for PR. After COVID they said screw the PR let's be greedy now.
>Because we all know corporations were keeping prices and profits low before COVID because it's good for PR.
Is this the same corporations that didn't want to pay "essential workers" a living wage and/or give them reasonable hours? I find it doubtful that they turned over a new leaf during covid because it was "good for PR".
After tough years for corporate profits due to covid, is it too simple that this inflation is the corporates trying to claw back additional profit that was lost during those years?
I think the easiest explanation is people rightly figured back during the pandemic lockdowns and wfh policies that people had more money than they usually did even in spite of some people losing their jobs. Gov spending was very high to be honest and people suddenly had somewhere between 1k to 2k extra cashflow. That kind of increase leads to every business trying to extract that as fast as they can.
If your business didn't increase their costs during the last three years it's a dying business.
This is another indication that we need to start breaking up large corporations. In a competitive market this wouldn't fly. You would be out-priced by your competitors and go out of business. EG: Why buy chicken at $4/lb from Tyson when you can buy it from 10 other companies for $1/lb.
But when you are such a huge percentage of the market you can easily watch your competitors (If you have any) run out of stock and raise their prices as well. I hope this gives the FTC a ton of ammunition in their future legal battles. Although I'm not optimistic, considering they are less funded than the legal departments of the corporations they are going up against.
Whenever I come across this argument I don't even know how to start attacking it because of how asinine it is.
If inflation is a product of corporate greed, do you concede that the fairly stable prices over the years have been a product of corporate benevolence? No, you won't.
The only workable explanation, in Friedman's words is that inflation is always and everywhere a monetary phenomenon. Any other explanation is economically illiterate.
It’s interesting to read all the comments here trying to find any explanation ut. Corporate greed, supply chain issues, Russian gas, etc… How about the base monetary supply inflated 4 times?
Okay so that explains inflation is always around… which part explains why it when from like a decade of 2% to 10%?
And don’t say supply chain because the fed basically discarded that when they finally panicked that it wasn’t transitory like they initially assumed and the scrambled with fast interest hikes.
Greedflation simply means a profit price spiral rather than a wage price spiral.
"Greedflation" is a new word to describe a by-product of supply and demand as old as capitalism itself. Companies raise prices when they can, and companies hate to lower profit and will never do so unless literally forced. They are money-hungry entities who will do anything for a profit, but they've been that way since the very idea of "companies" was in its infancy. And today's companies have to make a certain amount of profit relative to their competitors, or they'll get pushed out and go bankrupt.
There are 2 solutions to this problem: government interference and competition. IMO competition is what's desperately needed, and regulation/govt-funding to help the little guys with better ideas and lower profit margins compete with the big ones. When people stop buying from Walmart because their profit margins are too high, Walmart gets less total profit, and they can either lower their prices and/or sell better products, or suffer and potentially go out of business. This is how capitalism is taught in grade school, this is how it's supposed to work and actually benefit the common man, and the factors which make it not work are what we need to regulate and fund away.
* There's also private funding and educating the general population to choose smaller companies over lower prices. And most companies don't actually do everything they can to 100% maximize profit. However, I don't think you can rely on these factors, because a lot of people aren't really aware or motivated, and a lot of people don't choose for others' or long-term benefits over their own short-term ones.
Inflation is always greedflation. There's more money chasing less stuff so they hike up the prices on the stuff to capture as much money as possible, and that is inflation. That is capitalism with an inelastic demand curve.
If there were more goods and more competition then prices would lower.
They're always greedy, and if you keep spending they keep raising prices.
Why is this surprising? Higher rates mean businesses need to provide a higher return to stay competitive. You increase the cost of capital, businesses and people will adjust prices to adjust.
Wealth is not zero sum, my fellow HNer - and just because a few news houses blame the effects of government shutting down the economy on the wealthy doesn't make it right.
I guess I'm one of these humans you'd consider "beautiful".
We're not trying to say companies are evil for raising prices when they had the opportunity. Or that government was stupid for trying to save lives by reducing contact between people.
Most non-sociopaths understood it was reasonable for society to attempt this reduction in contact in order to not overwhelm the health service. And given that, some of the companies and individuals who benefited (whatever the reason), should pay a bit more tax for a few years to help out those that lost out (whatever the reason).
1. So swedes are “unreasonable“ considering they took completely different approach? Only “reasonable” when you completely ignore second order effects like the ones we’re dealing with here. Also if it was so reasonable then why the hell do you need to invent and push this greedflation narrative now?
> And given that, some of the companies and individuals who benefited (whatever the reason), should pay a bit more tax for a few years to help out those that lost out (whatever the reason).
2. We already did this with rent amnesty and bunch of other things. The end result - record high disposable income in the lower brackets where people just blow it all on goods and $20 mcdonalds delivered to your lazyboy idiocracy style -> inflation
Unsurprising, really. They were given cover to increase prices, so they did it. That is their duty as the operators of those corporations to the shareholders.
It’s twisted how that “philosophy” from hedge funds using leveraged buyouts to pillage corporate America has now become unquestioned wisdom for many.
A company relies on its customers, workers, owners and the society where it operates but hey let’s ignore all the rest and only maximize the short term benefit to owners by short changing both the workers and customers.
If it’s not the retailers, it’s the wholesalers, the suppliers, the utility providers, the lenders, the executives, the land-owners, the unions and even finally the workers. All of them trying to make as much money as they can. All of them raising their prices whenever (and if) they can.
Greed is not an explanation, because greed is everywhere in the supply chain, right down to the bottom. The question shouldn’t be why they wanted to (since why wouldn’t they?), but why they could.
Examining which part of the supply chain put their prices up seems pointless unless it sheds light on why that part of the supply chain in particular could put their prices up.