As corporate profits reach record high, Iron Mountain executive tells Wall Street inflation is great

Does Winn Dixie still smell like fish?

 

My wife and I do a lot more shopping at Costco and Sam’s these days. It’s really cheaper to buy it that way take what we need, and divide the remaining and give it to the kids.

 

No, they are The Beef People.

 

I’ve been in supermarkets all over the country and the world. There are some fancier ones, some crappier ones, but there is no better one overall than Publix. Whenever I am forced to walk into a Winn-Dixie, Kroger, Safeway, King Soopers, etc… I just feel dirty.

 

Fed should make clear that rising profit margins are spurring inflation

Broad-based inflation is normally a labour-cost problem. The rule of thumb is that labour costs are around 70 per cent of the price of a developed economy’s consumer prices. If wage increases are not offset by greater efficiency or reductions in other costs, the consumer will pay a higher price for the labour they are consuming. With normal inflation, central banks would need to create spare capacity in labour markets to push wages lower.

Wages have been rising but prices have been rising faster, so real wage growth is catastrophically negative. This is far removed from the 1970s-style wage price spiral; apart from the wage and price control debacle of Richard Nixon’s presidency, US real average earnings rose for much of the decade.

The US restaurant and hotel sector helps explain why wage costs have played a limited role in today’s inflation. Since the end of 2019, the average earnings of a worker in this sector have risen just under 20 per cent. But the number of employees has fallen over 5 per cent. Paying fewer people more money means that the sector’s wage bill has risen roughly 13 per cent. The real output of the sector has risen 7 per cent. So US restaurants and hotels are paying fewer people more money to work harder. The rise in wage costs adjusted for productivity since the end of 2019 is somewhere between 5 and 6 per cent. Restaurant and hotel prices have risen 16 per cent.

This is the current inflation story. Companies have passed higher costs on to customers. But they have also taken advantage of circumstances to expand profit margins. The broadening of inflation beyond commodity prices is more profit margin expansion than wage cost pressures.

 

It's not just the oil industry that's experiencing record profits from inflation.
Food Prices Soar, and So Do Companies’ Profits

 

remind me again how corporate greed is Biden's fault? Is this the business community driving inflation with much higher prices to pursue a political agenda? Do companies no longer compete on price?

 

I'm so old I still remember this commercial.

 

There is a big question about this that relates to the way people invest in companies now. While I would generally advocate, at an individual level, that people should invest in index funds, there is a competition and pricing question associated with the strategy. Essentially, if Vanguard, Blackrock and State Street combine to own 30% of Coca Cola, Pepsi, and Dr. Pepper, does it lower the competitiveness on price, since their largest owners essentially no longer care whether you, as a customer, buy one vs. the other? You could argue that private companies could still jump in, but most private companies with ambitions to being very large are just looking for the opportunity to go IPO and join the other public companies.

 

I remember that. One thing I learned back then was that the beef was great but you never, ever served one of their great steaks with any of their Thrifty Maid can goods or sauces.

 

Our economic crisis isn’t inflation, it’s corporate greed and the GOP will only make that worse

Yes. During this political season it is easy to blame President Joe Biden and Democrats for inflation. But that’s just not accurate.

Let’s be clear. Inflation is not unique to America. It is an international crisis. In the European Union, inflation is nearly 11%. In Germany, it is 11.6%. In the United Kingdom it is 10.1%. In Ireland, it’s 9.6%. In America, it’s 8.2%, much too high, but lower than it is throughout much of Europe.

The truth is that inflation is, to a significant extent, caused by the ongoing global pandemic, the break in international supply chains and the horrific war in Ukraine. But there is another major reason for inflation that too few people talk about. And that is the unprecedented level of corporate greed that we are now seeing.

According to a recent study, nearly 54% of the rise in inflation is directly attributable to the astronomical increase in corporate profit margins. In America today, while the working class struggles to put food on the table, fill up their gas tanks and heat their homes, corporate profits are at a 70-year high.