[some_furry]

> Huge stimulus programs over the past five years absolutely overcooked the economy and fueled high inflation.

The primary driver of inflation is record-breaking corporate profits, not stimulii or wages.

https://www.youtube.com/watch?v=Zi4KMCQuQYE

[jb12]

Record breaking profits are caused by, not the cause of, inflation as goods and services get more expensive while the cost of labour takes time to catch up. This is well known economic theory.

Did corporations suddenly become greedy in 2021? No, they were always so.

[rolobio]

Agreed. I keep hearing about these record corporate profits, and I always ask "are they record profits after being adjusted for inflation?" I would bet that some of them are, but these companies want to claim record profits (willfully ignoring inflation), so their stocks go up.

[somenameforme]

Inflation makes numbers go up, which tends to drive 'record' nominal (pre-inflation) profits. Even your video demonstrates this. Look at the first example he shows, at exactly 2:30. Procter and Gamble's operating margin started plummeting in the face of inflation and even after they raised prices, their margin remained well below what it was before inflation. This is because their costs not only increased, but increased more than their own relative increase in prices.

You can see the details of P&G's financial specs here [1]. Everything has been relatively flat to declining and those are in nominal terms, or in other words - before inflation is factored in. After inflation, they're taking a pretty serious beating.

---

Inflation is most easily understood by considering that money, in our current system, doesn't really have any meaning or intrinsic value. It's just numbers, and so the price of everything is simply set relative to the amount of money in circulation, and more precisely by the monetary velocity [2] or how often money is changing hands. If everybody was given a trillion dollars, it doesn't mean everybody's suddenly rich - it just means suddenly a Big Mac's going to cost tens of millions of dollars, and a new TV's going to set you back billions. You end up with the exact same relative values for things, but the values are bigger - because there's more money in circulation.

[1] - https://www.macrotrends.net/stocks/charts/PG/procter-gamble/...

[2] - https://en.wikipedia.org/wiki/Velocity_of_money

[chung8123]

The only way for the record profits was an increase in funds to spend at the corporations. There is no magic behind this. People had more money to chase fewer goods and companies were able to raise their prices.

[CuriousCosmic]

I'm not sure people outright have more money. I think a big part of it is that the average person has access to a lot of credit.

Generally the way I suspect it goes is

1. Draw from savings to buy essential goods.

2. Slowly load whatever you can't afford on your credit cards.

3. Get new credit cards before you start missing payments.

4. Load more on your cards.

5. Have nowhere else to go so start taking payday loans.

6. Run out of money.

Which is in stark contrast to pre-2000s recessions where access to credit was far more limited.

As it is currently, if you've had a credit card, it is incredibly easy to get more and you can get an incredibly large amount of accessible credit. The average american has around 30k USD in available credit (10k for 18-22 and 20k for 23-38 but 30k overall) with only around 5k or less of that utilized on average. That's a lot of money that companies can draw on before consumers pockets are truly empty.

https://www.bankrate.com/finance/credit-cards/what-is-the-av...

[whateveracct]

It's not solely due to increase in funds (I assume you mean stimulus?) I'm fairly sure corporations are getting money that would've went to other things (savings, for example).

[joelegner]

If so, how do said corporations get access to the the money that would have previously gone to savings?

More plausible to me is the idea that stimulus — printing new money by fiat — resulted in more cash in circulation. Corporations are like organisms that have evolved to capture and eat cash. They fed on the surplus cash, and their waistlines show it afterwards.

Meanwhile those of us with savings accounts pay the price when inflation reduces the buying power of the cash we had diligently set aside for future use.

[whateveracct]

Well usually I save my surplus cash. But if stuff costs more, I now save less implicitly. That is corporations getting access to my savings by raising prices. They aren't getting any stimulus money from me here because I never got any.

[latchkey]

> But if stuff costs more, I now save less implicitly.

Or you could just change your spending habits.

[whateveracct]

I could and am in a macro sense. But when things I normally buy are a little more expensive and I'm gonna buy them anyways (a grocery trip is a good example), I don't especially notice the haircut.

I guess you can blame me for not micromanaging every dollar I spend? But if I'm sitting in a drive thru grabbing a burger and fries and notice it's $5 more than it used to be, I'm probably still gonna buy the burger and fries. And I probably will still go grab one occasionally when I want it. Because saving $5 every so often isn't gonna really affect an activity that makes up a microscopic amount of my expenses (I've got fast food including coffee at 2.5% last I reviewed my data.)

But regardless I think what I'm describing is a real bit of human behavior at scale - and isn't that just economics at the end of the day?

[whateverman23]

> People had more money

Where are you getting this information? Raises are not keeping up with inflation. A few thousand in stimulus dollars years ago is not driving anything. PPP money didn't increase wages.

[explorer83]

Feel free to downvote this because it is a very simple observation and not based on deep academic study. I really hate wages have been so stagnant and have not kept up with inflation. I feel like I've been treading water the last 10 years of my adult life despite making above minimum wage. But I also can't help but notice a lot of people used to say "$15 dollars per hour is going to equal $15 dollar hamburgers" and now where I live $15 dollars per hour has become a pretty common starting wage and now everything is more than usual inflated.

[joelegner]

Individuals and businesses received direct payments in the form of stimulus checks. I have to think also money got into people’s hands by lending as the banks are how the new money gets into circulation. That’s my layperson’s understanding of a very complex system.

[whateverman23]

> Individuals

A few thousand dollars 2-3 years ago?

> Businesses

Payments that, at most, kept wages the same?

-----------------

People need to stop using "people are getting free money and that's raising inflation" excuse. Prices are rising and people are going into their savings or credit to keep spending. That's it.

[whateveracct]

Yeah the business money in theory was just to keep people on payroll

[blululu]

I'm not sure about the exact numbers on this one, but cutting the corporate tax rate in half is certainly a big stimulus that goes straight into the bottom line.

[HardlyCurious]

Why did corporations change once covid hit?