0.1% inflation for March

I think one of the disconnects of this whole conversation is people correctly telling others that certain things are market driven and therefore not good/bad. The problem that people forget when only talking about economic theory is that these decisions about the market are imperfect and made by people. People are incentivized by this system to do what’s best for them personally, and that calculus, along with a bunch of other big picture things influence market forces which is just one of many reasons that the ebbs and flows of the market can be capricious

 

I think eggs shot up due to a bird flu outbreak in chickens and many were culled.

 

What about oil prices?

 

slayering started this with characterizing higher profits as the core problem, and you defended him. Actually higher profits are the solution, and higher profits lead to more investment, more competition and more supply, and less inflation. Generally this is how it has played out.

 

As usual you filter what people say through your biased mindset.

No point in explaining it again.

 

I haven't defended anyone. I've only engaged with you on this debate and on a narrow point. That if profits increased by a higher percentage than prices increased, that higher profits are one of the components (or reasons) for the higher prices.

 

Yeah, sorry, but I think it's dumb we're even talking about Coca Cola in a thread about inflation. I'm not the one who brought it up. Let Coke charge what they will. We have bigger fish to fry.

 

Of course, that is obvious.

 

Again, I acknowledge soda shouldn't be a measure of inflation. Point is companies are using inflation as an opportunity to raise prices and claim its due to other reasons.

 

Just listened to a podcast that discusses companies raising prices

‎The Journal.: Why Some Companies Keep Getting Away With Higher Prices on Apple Podcasts

They are observing that in earnings calls companies are more open and blatant about their ability to raise prices and profits.

If I had to summarize it is a combination of market forces, and also a form of momentum and cycle of inflation, once people start expecting it, it keeps going until something stops it (like higher interest rates and slowing economy )

One noted economics reporter observed that from an economics theory perspective this is what companies are supposed to do

 

Inflation creates additional problems for corporations, because their viability depends on their ability to meet profit margins and when inflation is escalating much quicker than usual, corporations have to err on the side of higher prices than even necessary to make sure they maintain their margins. Corporations will seek to fatten their profit margins whether there is inflation or not. But they are not lying when they say they have to raise prices to deal with inflation. All it takes is one bad quarter and a company can lose 20% of its value in the stock market.

This is why the Fed is freaking out about inflation. It's easier for them to tackle unemployment, which is a pretty big issue in of itself than it is for them to tame inflation. Inflation has a lot of nasty side effects. Corporations raising prices and overcompensating is one of those. In general, most corporations have to remain competitively priced versus their market sector or else they will lose. So, I don't buy into inflation being a corporate conspiracy. Corporations will always raise their prices if the consumer will pay it, inflation or no inflation.

 

Then why did you disagree with it (with a 'sigh')?

 

that is terrible economics. you think raising prices has to lead to increased revenue & margins? if things are priced optimally, raising prices will decrease revenues & margins.

 

Not sure exactly what you mean - but as oil prices go up, as long as they manage costs appropriately, gas/oil companies net profit goes up. The news from those sectors supports the idea - they have had record profits two years in a row. Now, I'm sure we can argue that there are several "forces" that have driven costs up - and I see others have made the argument that companies tend to overestimate their price increases as costs increase (certainly as high as competition will allow).

The problem is that rising water doesn't float all boats in capitalism. Record profits for oil/gas most likely means higher costs for just about everyone else. If someone else is making a bunch of money that means someone else is spending a bunch. The way that our current system is set up, much of that financial strain has moved through the supply chain to the distributors and the consumers.

There are other sectors that during the pandemic were making money hand over fist - and one could argue it was GOOD for society - and those were scientific companies like Pfizer and Thermofisher Scientific. They took that money, reinvested it into R&D, paid their people extra, and pumped out (please don't argue vaccine stuff anyone) a life-saving vaccine for COVID in incredibly short time. So it's not like capitalism is all bad - those companies making record profits did so WHILE ALSO serving society.

That being said, I still think what we are doing here is unsustainable. So many companies with record profits, while so much of the world is taken advantage of to achieve those profits. The median income of a person worldwide is less than 10k last time I saw the number. That would be 11th percentile in the US, where median individual income is I think like somewhere between 37-42 depending on where I read it. So the median american is struggling mightily with high prices, while the rest of the world might as well be on another planet of struggle, but meanwhile these companies ACROSS SECTORS are reporting RECORD PROFITS.

Most of those profits are not being used for the betterment of any society. I just think a slight redistribution of SOME of that wealth is in order, otherwise the system will become break on itself.

But then instead we get lost in these conversations about how much Biden should or shouldn't have credit. Credit for what? just seems like a weird thing to argue about no matter who is president.

 

Ooooh... well then good, corporations are raising prices to gain optimal revenue. Not because they're taking advantage of Biden's inflation. Thanks for clearing that up for us.

 

I agree with your last two paragraphs. I’m am not against selectively and moderately higher taxes to fund other priorities, including some redistribution. But to be clear, that is not going to drive prices down. It would probably do the opposite if anything.

While I understand higher profits don’t always allocate resources fairly and equitably, to a degree they do better than anything else. Higher profits attracts innovation and ultimately greater supply and more alternatives.

 

that’s nonsense too. As Elon’s boy you should know that.
Tesla cuts US prices for sixth time this year ahead of quarterly results

 

But they shot up by more than the math on how many were culled and how many were available said it should have. Until reporters started publishing the matj, then the prices started to dropbefore the supply caught back up.

 

Looks like you're creating straw men just to be a bitch. I've already stated free market principles will force corporations to keep prices in check to remain competitive. If Tesla could profit more by keeping prices up, they would certainly do so. That's been my point the entire time. Corporations can't simply raise prices and blame it on inflation without repercussions. Not sure what point you are striving at here, but I don't think you really have one.

 

I can’t speak on what and whose math you are referring to, but a big driver of the price change will be elasticity, and I suspect eggs are fairly inelastic in the short run such that modest changes in supply have large impacts on prices.