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by somenameforme
1113 days ago
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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 |
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