[SamPatt]

Incredible that there's not even a mention of monetary policy.

Are they proposing that corporations suddenly became greedy in 2020? During previous periods of low inflation, did they congratulate those corporations for their altruism in keeping prices low?

Money is subject to the same laws of supply and demand as everything else, and when there's more of it, it's less valuable.

[ramraj07]

Corporations didn't suddenly become greedy, they didn't realise that they could be this greedy and get away with it. Typically the market forces that would keep such price gouging in control is competition i.e. if you increase prices a competitor could cut you short and gain market. The pandemic allowed everyone to raise prices and now they played chicken to see who can keep the prices high for longer, only to realise they can not only keep prices high but keep jacking it further and everyone implicitly will do it in unison (or perhaps they had a secret cabal meeting agreeing to it).

We give these CEOs too much credit. The vast majority of them aren't that smart. They clearly realised this is possible, I doubt they have thought about the long term implications to their own bottom line. I suppose they really don't care either.

It'll be interesting to see how the market corrects itself. Everyone's selling good for insane profits, shouldn't that mean there's opportunity for an enterprising person to come in and disrupt that? Only time will tell.

[kennethh]

In mye MBA studies the teacher for accounting had done research on return of equity (ROE) and it showed over time 10+ year for all Norwegian companies it stuck around 9.3% If something become very profitable then many companies should start to target that marked and the profit should be less over time. It is reasonable to think the same thing should happen now.

[pydry]

Unless market consolidation has reached a sufficiently high threshold.

[prepend]

Is there a significant change in market consolidation across all areas in the past 3 years?

Were M&A higher more recently?

It seems odd to me that market consolidation happened in all areas of the CPI and it’s happening at the same time as extremely high money supply is just a coincidence.

[littlestymaar]

> Money is subject to the same laws of supply and demand as everything else, and when there's more of it, it's less valuable.

But somehow, none of the post-subprime-crisis QE had any impact on the price, how surprising…

The monetarist take on inflation as a product of money supply died in that period (so much that monetarist proponent invented a new concept of “asset price inflation”).

Inflation in general[1] is not and has never been a money supply topic: it's a supply and demand of goods and services issue. That's why inflation rose in 2021 in the US when the supply chain from China was disrupted, and not so much in the EU which is less dependent on China, despite similar monetary policies on both sides of the Atlantic. And why inflation ended up raising in the EU when Russia invaded Ukraine, because the gas supply was vulnerable.

Inflation isn't even related to the “value of money”, in 2021, the “value of 1$” grew on the FX market, at the same time inflation was raging in the US. In fact, during that year, if you were paid in dollar while living in the Eurozone (like I am) your purchasing power grew (because the price variation between EUR and USD was bigger than inflation in the Eurozone).

Another nail in the coffin of this urban legend is the Eurozone itself: the monetary policy is controlled at the EU level, yet inflation in 2022 has been very different between one country to another (from 5 to 15% YoY, that's a threefold difference!).

[1] hyperinflation is another topic, but even there, it's more of a “loss of confidence in the value of currency” than a supply and demand issue.

[SamPatt]

Astounding that you're claiming monetary policy can lead to hyperinflation, but not inflation. As if those are unrelated concepts.

You are very eager to put nails in coffins and claim that the common sense understanding of inflation (if you print too much money it loses value) is an urban legend.

[littlestymaar]

> As if those are unrelated concepts.

They are. A slow/moderate increase in prices (even 20% a year) has nothing in common with “the salary you've received on the first of the month has lost most of its value by the end of the month”, the social and economic causes and consequences of these two events are completely different.

> that the common sense understanding of inflation

It's only “common sense” because Milton Friedman convinced a generation of people of it, but it goes pretty much against all empirical evidence (including in recent time). The sun and stars don't orbit around a fixed earth either, btw…

[SamPatt]

I'm listening to the audiobook "The Price of Time" right now and it gives chapter after chapter of empirical evidence.

Friedman was absolutely not the first economist to notice the connection between monetary supply and inflation. Locke wrote against artificial low interest rates in the 18th century.

[littlestymaar]

Locke probably got it from Cantillon (who made a fortune out of John Law's system, how ironic), but this reference probably summarizes the biggest mistake neoclassical economists have been making, ignoring what happened between the 18th century and the 20th one: the Industrial Revolution.

In a pre-industrial economy, the total economic output is essentially fixed (crop production, which makes the vast majority of the economic output, mostly depends on the weather) and supply is always the decisive factor in an economy.

In industrial economies however the economic output mostly depends on the demand: if there's demand for something, then the industries will just ramp-up production to fit the demand (be it for smartphones or aircraft carriers like in WWII). In this regime, you don't really have monetary-induced inflation, until the industrial output can't follow for some reason (in most cases, the output in actually decreasing, meaning that stopping money emission won't solve the issue either, and you need to actively contract the economy to curtail inflation (like Volcker did after the oil shocks) or just slow it down a bit to wait until the problem sorts itself out, à la Jerome Powell).

[sharts]

Corps are always inherently greedy. 2020 is when corps started blaming the working class for receiving pandemic aid to stay afloat and started price gouging. Nevermind a decade of low interest rates propping up garbage corps and inflating markets.

Has there even been "low inflation" since dropping of the gold standard?

[littlestymaar]

> Has there even been "low inflation" since dropping of the gold standard?

The inflation between 1968 and 1970 (during gold standard) was above 4%, which is higher than the inflation has ever been between 1992 and 2020.

[fragmede]

Yes, and then during the 2007-2008 recession, there was even a brief deflationary period, so it's not the gold standard that's the issue.

[FooBarBizBazz]

In game theory, correlated equilibrium is possible without explicit communication, simply by having access to some signal that (everyone knows is) common knowledge. COVID and interest-rate opportunism by corporations could maybe fall into this bucket without explicit collusion.

Granted, the reality is probably less subtle than all that. When Mark Zuckerberg announces that he's doing stealth layoffs by "raising the bar on performance management", and this is reported in the news, the herd animals in C-suites see and follow. Subtle mechanisms of coordination don't need to be invoked; it's just straightforward mimetic fashion.

Returning to game theory, correlated equilibria can be good -- a way out of Prisoner's Dilemmas -- but in this case I'm afraid it's mostly just the actions of "capital" that are correlated. The Left's communication channels are jammed with pomo chaff, and its members' actions are more independent and uncoordinated.

[gitrog]

They do mention monetary policy. Is there something specific about monetary policy that you believe contributed to rising inflation?

I don't know if they're suggesting that corporations became greedy but rather that they unilaterally increased prices during the pandemic which is the main cause of inflation.

[ChuckNorris89]

>Is there something specific about monetary policy that you believe contributed to rising inflation?

Surely doubling the money supply in circulation during the 2020 money printing boom had an effect on inflation, wouldn't you say? It' snot like the corporations and street banks just made their money out of thin air.

[fragmede]

The how is important though. The money supply grew due to PPP "loans" freely being given out to corporations with the help of street banks. I believe a more careful release of the same amount of money wouldn't have caused the same amount of inflation.

[missedthecue]

Yes corps are greedy all the sudden. This is why the Great Financial Crisis is referred to in academic circles as the "Great Generosity" because deflation occurred.