13 votes

Topic deleted by author

16 comments

  1. [10]
    stu2b50
    Link
    I find this article baffling - it brings in the counter-argument, as a good article should... then just doesn't address it at all? It's almost a better argument for inflation NOT being from...

    I find this article baffling - it brings in the counter-argument, as a good article should... then just doesn't address it at all? It's almost a better argument for inflation NOT being from "corporate greed", since the people they brought on for the counterargument illustrated their point much better with no rebuttal?

    At best the piece is making the case that price increases are due to laxing corporate oversight over the pandemic period - which they don't really provide any evidence for, but is a reasonable enough thing to happen apriori I suppose - but that also defeats the title of the article? Laxing corporate oversight resulting in consolidation stoked inflation? The heck is "greed" about except a red herring?

    Again, the counterargument quote they brought on says it well

    “My friend and economist Jason Furman says, ‘Blaming inflation on greed is like blaming a plane crash on gravity.’ It is technically correct, but it entirely misses the point.”

    It's almost counterproductive since framing it as a "greed" problem leads to... trying to make humans not greedy, and, uh, good luck with that one, as opposed to having more regulation where they think there's been undue corporate consolidation, which is something that is difficult but at least possible.

    10 votes
    1. [9]
      rosco
      Link Parent
      There is data to support the theory that corporate profits are driving inflation. And data on how corporate profits and labor's share of GDP are inversely tied.

      There is data to support the theory that corporate profits are driving inflation. And data on how corporate profits and labor's share of GDP are inversely tied.

      3 votes
      1. [8]
        stu2b50
        (edited )
        Link Parent
        It goes back to that quote Corporate profits can't drive inflation. Corporate profits aren't something companies get to choose. You don't just choose how much profit you make (if only!), and...

        It goes back to that quote

        “My friend and economist Jason Furman says, ‘Blaming inflation on greed is like blaming a plane crash on gravity.’ It is technically correct, but it entirely misses the point.”

        Corporate profits can't drive inflation. Corporate profits aren't something companies get to choose. You don't just choose how much profit you make (if only!), and companies certainly didn't choose to make less profit if they had the choice when inflation was at 2%.

        The question is, if profit margins are up, why is that now possible? Is it excess nominal demand? Maybe a market failure like a cartel. But those are the drivers, if any one or all of them do exists. Margins are a result from those drivers, just like inflation itself is.

        edit: another analogy is that it’s like saying, “this car is moving forward because the front wheels have positive angular velocity”. Well, I suppose that is in some sense the case, but wheels don’t just spin on their own.

        If you’re trying to figure out why the car is moving forward, or trying to make it stop, then it’s ultimately not very useful to note that the wheels are spinning. What is causing them to spin? Is there a motor, electric or combustion, driving them? Maybe gravity on a slope? Maybe a force of tension from a truck pulling the car?

        5 votes
        1. EgoEimi
          Link Parent
          This is the kind of questioning I find sorely missing in mainstream discourse. It's not like corporations were being charitable before in leaving money on the table then suddenly changed their...

          The question is, if profit margins are up, why is that now possible? Is it excess nominal demand? Maybe a market failure like a cartel. But those are the drivers, if any one or all of them do exists. Margins are a result from those drivers, just like inflation itself is.

          This is the kind of questioning I find sorely missing in mainstream discourse. It's not like corporations were being charitable before in leaving money on the table then suddenly changed their minds and decided that, why yes, they would like more money all of the sudden.

          I doubt that cartelization is happening in every sector of our economy, though there have been murmurings that real estate pricing software have been inducing a kind of decentralized, uncoordinated cartelization. Perhaps software, data, and data science are part of the puzzle. They have allowed the sellers to collectively and incrementally price more optimally — optimal in the sense of pushing closer to the hypothetical price points which buyers are willing to maximally bear.

          4 votes
        2. Adys
          Link Parent
          Revenue isn't something companies get to choose. Positive corporate profits are usually a choice. I say usually, because at some point, the people making that choice may have a gun to their head...

          Corporate profits aren't something companies get to choose.

          Revenue isn't something companies get to choose. Positive corporate profits are usually a choice.

          I say usually, because at some point, the people making that choice may have a gun to their head doing so. For some public companies, the board may choose to push for high profits so stockholders get high dividends. But if I'm CEO, and in January you tell me "we're forecasting 1bn in revenue, and only $500m in costs for Q1", I have to make a choice not to increase costs.

          Increasing costs can mean any of:

          • Re-investing into R&D
          • Expanding the company (via hiring or new departments)
          • Increasing salaries
          • Acquisitions
          4 votes
        3. [5]
          rosco
          Link Parent
          I suppose that's true, but it feels like there are levers you can pull within a company to drive profits and margins. For crude oil, the decision to stop oil exploration and restrict supply was a...

          Corporate profits can't drive inflation. Corporate profits aren't something companies get to choose. You don't just choose how much profit you make (if only!), and companies certainly didn't choose to make less profit if they had the choice when inflation was at 2%.

          I suppose that's true, but it feels like there are levers you can pull within a company to drive profits and margins. For crude oil, the decision to stop oil exploration and restrict supply was a direct mechanism to increase profits... off of the back of federal support.

          You're calling these market failures, but they are functionally how our market works.

          1 vote
          1. [2]
            Comment deleted by author
            Link Parent
            1. rosco
              Link Parent
              Wow, thanks for your insight. That's a an incredibly nuanced perspective I'm not sure how else I would have gotten. This has been a pretty enlightening conversation for me. I have to admit I have...

              Wow, thanks for your insight. That's a an incredibly nuanced perspective I'm not sure how else I would have gotten. This has been a pretty enlightening conversation for me. I have to admit I have a pretty poor understanding of how the oil industry works.

              All of us within the industry knew and were talking about about how the lack of exploration would become critical "around the mid 2020's". I personally had this discussion with my coworkers during seminars about the topic in 2017. Just because we knew it doesn't mean the bean counters were ready to open up the purse strings and blow billions on new exploration. We put on our blinders and hoped something would change for the better.

              If I'm understanding correctly, it sounds like maximizing short term profits was the first push...

              And then, like a miracle, all the various bickering and backstabbing companies stopped production, nearly world wide, to such a degree that we have never seen before in the history of this industry. It wasn't coordinated, it wasn't a conspiracy. It happened because the price of the commodity went to zero.

              And this was the second.

              I'm curious if you think there is anything policy related that could prevent maximizing short term profits or prevents bust in the future? Or maybe this is truly the last oil boom. Thanks for your insight!

              3 votes
          2. [3]
            stu2b50
            Link Parent
            There are, and they're always already maximally pulled to maximize profit. Not margin - again, margin is incidental and just part of what kind of market you're in and how they work. Walmart isn't...

            but it feels like there are levers you can pull within a company to drive profits and margins.

            There are, and they're always already maximally pulled to maximize profit. Not margin - again, margin is incidental and just part of what kind of market you're in and how they work. Walmart isn't a worse business than Whole Foods because Walmart has lower margins.

            For crude oil, the decision to stop oil exploration and restrict supply was a direct mechanism to increase profits... off of the back of federal support.

            That only works with a cartel. If a particular gas company lowers their exports, it will raise the overall gas prices, but it also... loses them money. Because they're not selling as much gasoline. And companies do not like to lose money for the most part? Again, companies pretty much all optimize for profit, not margin... because what is the point in optimizing for margin. That only works if a majority of oil producers collude and agree to raise prices at the same time, without undercutting each other.

            That that does happen! It's why OPEC exists at all. But the reason that causes prices to go up is that there's a cartel, not "greed" or "corporate profit margins". The solution is to break up the cartel.

            If you think the US gas producers have a cartel, you should write articles about how there’s a US gas cartel and that we should stop that. That’s actionable!

            You're calling these market failures, but they are functionally how our market works.

            I mean, yeah, if they didn't exist we wouldn't give them names and study them. I'm not sure why calling them market failures implies they don't exist. A broken valve seal is a type of combustion engine failure - they do happen to cars.

            3 votes
            1. [2]
              rosco
              Link Parent
              That makes sense, so maybe I can turn this around and ask with our current political and economic climate what you see as our options for restoring balance between capital and labor?

              That makes sense, so maybe I can turn this around and ask with our current political and economic climate what you see as our options for restoring balance between capital and labor?

              1. stu2b50
                (edited )
                Link Parent
                "Restoring balance between capital and labor" is both quite broad and not well defined, so I'll substitute with "inflation in the US", as that is the topic of the thread (well, it doesn't specify...

                "Restoring balance between capital and labor" is both quite broad and not well defined, so I'll substitute with "inflation in the US", as that is the topic of the thread (well, it doesn't specify US per se but everyone brought on and all the examples were in the US)

                If you look at the last month's CPI report, for one inflation is quite down on a MoM basis. Headline CPI was at just 0.1%, even if that "cheats" by including oil prices. Groceries, for instance, has been on a downward decline the last 12 months, with March at -0.3%. Food away from home has been fairly sticky, but that's actually likely wage-driven. Restaurants are a low margin business in a market with very elastic demand, so fluctuations in wages has a large effect on price (I'd also note that looking at, say, corporate McDonald's earnings here is pretty misleading; corporate McDonalds makes money primary from franchising fees, and it's the franchises themselves that would bear the costs of employment). It's what it is, eating out is not a necessity and since it primary employs low income workers an increase in pay and an increase price is net progressive.

                Energy has been on a steady decline, although that's not something that can be relied on (which is why core CPI strips it out).

                Cars and shelter then stand out as major contributors. For rent, there may actually be a pseudo cartel - the software that coordinates rental prices - and if that's the case, then that kind of cross-landlord price controller should be banned, which can be done on both a federal and local level (with the latter being more realistic). Of course, housing has been a plague in the US for longer than the pandemic. Much can be done to just have more housing built, and credit to the people pushing for it, a great deal has been accomplished across the country to that end. There's a house bill to remove parking minimums, which has already been abolished in California and New York among others.

                California has actually had a slew of "YIMBY" bills pass, and they certainly need it. So it's something that's gathering steam. We should end up in a place like Japan, where there is so much development that the average parcel of land is a depreciating asset.

                In a broad sense, if you view increasing profit margins as a typical symptom of demand-push inflation (as opposed to supply-pull, which is perhaps what most people are use to, and why it seems strange that margins increase), then the usual factors to slow the economy like taxation or cuts in government spending are options for fiscal policy, and raising interest rates for monetary. The latter two risk hitting demand too hard, but are the most likely to occur. Well, interest rates already went up. We'll likely get spending cuts from the debt ceiling negotiations. Unlikely more taxes will pass unless Democrats win all 3 chambers again.

                Probably progressive taxation is the most well suited for hitting demand without injuring the economy too much. Both income taxes and progressive consumption tax schemes. Probably won't happen on a federal level, but it can happen on a local level (Seattle is adding an additional capital gains tax, for instance).

                4 votes
  2. [5]
    cloud_loud
    Link
    A lot of jacobin articles huh

    A lot of jacobin articles huh

    10 votes
    1. vord
      Link Parent
      They hit the nail pretty hard on the head. They're biased, and their language and story choice reflects that, but in an informed and factual way, rather than a propaganda way. I find it telling...

      They hit the nail pretty hard on the head.

      They're biased, and their language and story choice reflects that, but in an informed and factual way, rather than a propaganda way.

      I find it telling that the "far left" sources do not have the same level of reality distortion that far right sources do.

      10 votes
    2. [3]
      Micycle_the_Bichael
      Link Parent
      There have been 3?

      There have been 3?

      4 votes
      1. [2]
        rish
        Link Parent
        I think like me they also opened tildes when those three posts where at very top together.

        I think like me they also opened tildes when those three posts where at very top together.

        3 votes
        1. NaraVara
          Link Parent
          The bright red favicon also really stands out.

          The bright red favicon also really stands out.

          4 votes
  3. Nivlak
    Link
    I see some disagreement in the chat, lemme grab some popcorn real quick.

    I see some disagreement in the chat, lemme grab some popcorn real quick.