I don't understand why everyone hates the rich. Without them who would...*checks notes*...trash the economy repeatedly with no consequences?
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Tell me you dont understand how economies work without telling me you dont understand.
@freemo @geekysteven Are they entirely wrong? All I know is that while companies are making record profits, gas prices have been rising for most of #JoeBiden’s presidency, so that makes it more expensive to transport goods, and therefore raises the prices for those goods. I would presume.
Mostly wrong. Inflation isnt caused by a desire for profits and cant cause that in and of itself. Where they show a hint of truth is it **can** cause inflation in the scenario you have a monopoly. I have mentioned before we need strong monopoly enforcement.
In fact I already mentioned the inflation was about to happen right before it happened. Anyone who understands economic models knew this was coming and we knew exactly why, and it isnt the large companies.
We had the entire economy shut down, we were about to have an economic crash. We traded an economic crash for inflation by engaging in Quantitative Easing. Anything other than QE as an excuse for why it is happening is severely disconnected with the reality.
@freemo @geekysteven So are record profits a side effect of inflation?
@mrman @geekysteven @freemo I had assumed so, if companies want to have the same margins as a percentage of costs, but I didn’t have all the facts to back up that theory
With inflation, if there are no other factors or economic issues, then wage/salary increases along with cost of things. The end resultis that companies make more in dollars and cents, and charge more, but people make more income by an equal portion.
If you make x2 the amount but everything costs x2 the amount are you really making record profits? We usually adjust for inflation for exactly this reason.
@realcaseyrollins
GDP goes up too. It even rose in 2020
@geekysteven @freemo
Depends, are we talking inflation adjusted profits, or non-inflation adjusted?
@freemo @geekysteven I think the claim is that adjusted for inflation, the big companies are at record profits
If they are at record profits after adjusting for inflation then that is an indication of a healthy economy despite inflation.
You have to remember inflation is **not** an indication of an unhealthy economy in the present, though if it is excessively high it will produce an unhealthy economy in the future of course.
You can have inflation and still have a thriving economy, making inflation adjusted profits is largely unrelated to any inflation.
By the way here you can see a chart showing the relationship bertween corporate profits and inflation. You can see in the past there is very little relationship between them: https://randomterrabytes.net/2022/05/22/inflation-and-corporate-profits/
Now the real question is why did we have those huge corporate profits seemingly out of nowhere during a downturn in the economy... I answered this already, it was QE.
So again it is **not** the profits thats is to blame, it is something totally unrelated (QE) that happened to have the side effect of **artificially** increasing corporate profits. This injection of free money caused inflation, not the profits themselves.
Now for comparison check out this article showing the relationship of QE and inflation. Not only does QE very closely match the inflation rate but youll notice this continued inflation spike was well predicted and expected before it even took off 3 years ago. No corporate profits needed nor matters:
https://www.cfr.org/blog/why-fed-bond-binge-will-boost-inflation-1
Then the next step is to check expenses vs revenues. You can increase your margins by reducing costs just as easily as raising prices. Then you need to ensure that the revenue came from actual product sales and not, say, asset sales.
The term “record profits” doesn’t mean much without a lot of context. Most articles don’t go into the real depth. And even if they did, most people and media don’t look much past the headline.
People making such claims have very likely never signed the front of a paycheck.
@midway @geekysteven @freemo That’s a good point.
I’ve heard it said once that corporations behave more ethically under stable economics than in unstable economies, and it makes sense. Even if the leftist line was correct, it’s possible that these CEOs are storing their acorns for the winter so to speak, not inflating prices out of mere greed.
If a financial disaster is impeding, as I suspect it is, there’s no such thing as a company having too much money.
Even if it’s just to make more money, that’s not illegitimate. Businesses exist to make money by serving people. Their goal is to charge as much as they can while maintaining sales. If they charge too much, they will eventually lose market share. But raising prices to increase profits and profit margins is not a crime or even immoral. It’s a normal business practice. There is no “right” price except for what people are willing to accept.
@midway @geekysteven @freemo I largely agree although price gouging for, say, drinking water would certainly be unethical.
Price gouging is illegal by anti-trust laws. You can not manipulate the supply and demand by controlling a vertical/horizontal segment of the industry.
For example if companies intentionally coordinated to increase prices artificially by all agreeing not to compete this would be illegal on any scale, even between just two companies.
I'd also argue that prioviding water should be a duty of governments not private companies... A priovate company should be welcome to price gouge on water because they are providing water where there is a market, which implies filling a gap that the government should have already supplied. It is unethical the government didnt provide the water, not for the company charging for it.
I’ve heard it said once that corporations behave more ethically under stable economics than in unstable economies, and it makes sense.
Yes it does but not just companies… everyone of every class behaves more poorly during economic turmoil (or any turmoil) than economic stability.
Even if the leftist line was correct, it’s possible that these CEOs are storing their acorns for the winter so to speak, not inflating prices out of mere greed.
SSaving money isnt unethical, so if this were true its moot to your point. But its actually quite the opposite. Inflation encourages people dont hoard their money. Hoarding it would devalue too fast under inflation so people need to invest their money to secure it. Remember its important not to think of inflation as equivelant to unstable or bad economy, within reasonable levels it is desired as it encourages investment and a healthy economy. Inflation is bad when it is too high or too low. When it is too high causing hyperinflation only then can it result in instability (and yes right now its too high).
If a financial disaster is impeding, as I suspect it is, there’s no such thing as a company having too much money.
Actually that is exactly a problem. If they have too much money (instead of spending it on assets) then their value will crash along with the money. But when they invest in assets then their assets skyrocket in face value as money devalues.
@freemo @geekysteven The common leftie line is that companies are unnecessarily inflating prices so that they can make record profits. I can’t deny that they are making record profits but I suspect that this isn’t the only reason why they’re raising their prices.