[zzalpha]

So, let's start with the basics: the profit margin. Basically, if it costs you $1 to make a good, and you sell it for $2, then you have a $1 margin.

The current data shows that margins are quite wide. This means that companies are selling products, services, etc, at a cost that's a lot higher than it's taking to produce them.

This is normally explained through things like labour arbitrage (move production to cheaper places), efficiency gains through technology, and demand growth that allows one to command higher prices for the same goods.

Basically anything that allows you to either cut production costs or increase prices.

But, a large profit margin means a competitor should be able to step into the market, by accepting a lower margin in order to reduce prices. This is the "pricing cycle" they refer to in the article. If that doesn't happen, that indicates something fundamentally odd is going on in the system.

[nefitty]

Perfect. That clarifies things. Thanks!