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Comment by _huayra_ | Hacker News Reader

A better headline: most US workers had no choice but to accept the pandemic profiteering of corporations that have little, if any, competition, leading them to raise prices for no reason other than shareholder rewards and stock buybacks.

We talk about inflation as if it is some law of nature or some ethereal boogeyman. It's giant corporations deciding that muH suPpLy ChAiN DisRUpTiOn is a great excuse to paper over their own greed.

This last round of earnings calls have been nuts. So many times, the answer of "why are you raising prices when our profit margins are so high?" is always some corpspeak version of "cuz we can".

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None of this is true, I'm sad to see such a misunderstanding of basic facts on HN of all places.

To actually believe something as stupid as you're claiming, you'd have to assume that the giant corporations suddenly decided to crank the greed knob in lockstep with a massive amount of money being printed in the last two years.

On top of that, you'd also have to assume that housing (which is in no significant way controlled by corporations) coincidentally skyrocketed at an unprecedented rate at the exact same time (along with equities) caused by a completely separate mechanism.

The empirical evidence supports that view - once you drop below the aggregate [0]

Housing increases in price because the market doesn't produce enough housing to go around. During the pandemic we saw the price of Used cars start to rise and behave like housing normally does. Did we call that 'inflation', or did we say 'we need to produce more cars'.

That housing increases in price is the sign of an oligopoly, not inflation. Smash the oligopoly, distribute the work around the country and build sufficient houses so that houses depreciate in value and that will fix that particular problem. As it does with cars.

[0] https://economicsfromthetopdown.com/2021/11/24/the-truth-abo...

    Housing increases in price because the market doesn't produce enough housing to go around.

Are you claiming that housing supply shrinking during the exact time of M2 expansion is the main reason that housing appreciation skyrocketed compared to other previous years?

Even if you make that claim, what's your (separate) theory with equities?

As for your link, I read it, it's propaganda and not actual substance. There's no mention of how CPI is calculated with consumer substitution of mind to smooth out increased variance, on top of that this guy completely ignores weighting.

No one gives a shit if suddenly tissues and tic tacs are 1/100th of their previous price when rent doubles along with health insurance.

It's precisely the same 'theory' with equities.

The price goes up because there is an inadequate supply of equities - hardly surprising given all the buy backs and lack of new issues.

Supply and demand used to be the basis of economics. If prices go up for a thing, that encourages more of the thing to be made.

So we fix it by making more stuff. That's what the market clearly wants - more houses and more investment opportunities.

The trouble with monetarists who quote 'M' series as thought they were handed down from Mt Sinai is that they are obsessed with looking at the cow from the smelly end.

It all becomes clear when you look at it from the smiley end.

The number of shares has nothing to do with supply. Making “more shares” doesn’t increase supply. What happened with equities is that the dollar became worth less because their are more of them.

This is true for everything else except for some physical commodities it is further exacerbated by some physical shortages (you aren’t wrong about a housing shortage but that doesn’t affect the second derivative here).

What you're ignoring is that a large proportion of the money printed (trillions) went towards "corporate welfare", inflating the profits of the very companies who then turned around and told their employees "sit tight we're tightening the purse strings due to the pandemic, no raises for you we can't afford it"

> you'd have to assume that the giant corporations suddenly decided to crank the greed knob in lockstep with a massive amount of money being printed in the last two years

I mean, corporations are understood to behave as greedily as they can get away with.

Corporations operating in lockstep to maximize profits is just how businesses work.

It was obvious when Republicans and MSM were setting the expectation for inflation.

People defended the price hikes during the trade war as “pain for some gain” but it was a president that entertained them so it was ok.

    To actually believe something as stupid as you're claiming, you'd have to assume that the giant corporations suddenly decided to crank the greed knob in lockstep with a massive amount of money being printed in the last two years.

Alternatively, it would be incredibly naive to assume flavors of this are not happening. Remember, just because collections of entities do similar actions at the same time (in lockstep) does not mean they are colluding or organized, it simply points to the fact that these entities the same motivations and same external forces at the same time.

> you'd have to assume that the giant corporations suddenly decided to crank the greed knob in lockstep with a massive amount of money being printed in the last two years

No need to assume that, they're perfectly capable of all independently noticing the rise in headlines mentioning inflation and independently choosing to use it as a cover for price gouging.

so you think that the companies couldn't price gouge until their were a certain threshold of news articles mentioning inflation, that's your theory? They were waiting to do this?

"Let's use this as an opportunity to raise prices only to increase profits" has probably been said at most board meetings on most years over the last 10 years. We know this because it's just business people acting in their own interests, doing what they want to do, and in a lot of cases we have proof. When we don't have hard proof, we do know of companies that raised prices and reported record profits. It's been all over the news.

I don't know why you are acting like this is unbelievable or a conspiracy, it's kind of just business as usual at this point.

Academics refer to this phenomenon as the "greed cycle".

https://i.imgur.com/WZz3pIX.jpg

Oooh, that is interesting. Thank you!

But profit margins haven’t expanded…

That is untrue. Corporate profits exploded shortly after the pandemic began.

https://fred.stlouisfed.org/series/CP

He said margins. Your link doesn't refute his point.

My link does refute that point because it considers corporate profits as a percentage of GDP. That factors in costs, not just revenue, because paying employees (or buying supplies) is part of GDP.

Here's a link that also shows profit margins going up a lot: https://www.bea.gov/data/income-saving/corporate-profits

That word doesn't mean what you think it means.

then why can't we just buy stock in these companies making mad money and get rich ourselves.

The products and services with the greatest increase in prices are all categories in which supply has been greatly disrupted, or demand has boomed due to lifestyle changes. There’s no conspiracy here, just basic economics.

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