Incredible that there's not even a mention of monetary policy.<p>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?<p>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.
It does really feel like the cat is out of the bag that producers anywhere in the supply chain of housing and food realized they could do whatever they want and we can all suck wind. Every significant expense I have is up more than 40% in the past two years.
Fake news.<p>This is a measure of where inflation "goes", not what fuels inflation. The narrative that profits are "fueling" inflation is completely made up and the people pushing it are lying to everyone for political reasons.<p>Inflation is caused - in most countries - by excessively loose monetary policy (sometimes fiscal policy, sometimes both). If government policy creates inflation (average prices go up) that money can flow to a domestic labor or domestic investors or leave the country. This depends on supply-side factors that are basically orthogonal to the inflation question. It is true that in the most recent round of inflation it primarily led to increased corporate profits.<p>There is a theory from the 80s called the wage-price spiral [Blanchard] that talks about how inflation (which is initially caused by fiscal or monetary policy) can become self-sustaining if wages and prices are set in a staggered back-and-forth kind of way, as workers react to higher prices by demanding raises, and firms react to higher labor costs by raising prices. However, there is no serious theory that such a process would happen with profits. That makes no sense at all! The exact opposite would be true, if anything. High profits in some time period would likely regress to the mean as price competition sets in. In fact, this is exactly what is happening right now, as corporate profits after spiking over the past 12 months are shrinking.<p>The "profit-price spiral" narrative is being pushed by the same disingenous idiots pushing the "greedflation" narrative - it is not a serious attempt to explain inflation, it is an attempt to use reasonable-sounding economics words to blame inflation on companies instead of the actual culprit: governments that overstimulated their economies to such a degree that they caused both inflation and profits to spike.
Note that despite the title, this isn't an impartial report on an unrelated academic institute's peer reviewed analysis.<p>It's a press release by the (political) institute that compiled its opinion on the subject.<p>That latter is not a problem (and the political bias could have been the other way), but bear in mind if you take the time to read it on the assumption the headline here has some weight.
A related question which I'm curious about: Suppose you own a well-diversified investment portfolio, work a job, and consume a relatively typical mix of goods and services -- what's the point (e.g. a ratio of how much you have in equities to how much you spend per month) where the "typical" margin-increasing price hike benefits you overall? In other terms, if this pattern of behavior results in a transfer from consumers to owners, what kinds of people are at the equilibrium point, where your lost purchasing power from price increases is exactly matched by increased value of one's investments caused by fatter margins?
Note that higher interest rates necessitates higher corporate profits. If corporate profits didn’t rise with interest rates, then the risk adjusted return on equity would drop relative to the risk free rate. Imagine you’re considering stocks versus bonds at 5% versus 0% on bonds- given the risks stocks hold, bonds look relatively more attractive. The other side of higher equity costs is less funding for business investment - fewer loss leaders, fewer vc funded firms running quarterly losses, and so forth.
This is the same narrative I am seeing in Canada too. Suddenly all the news feeds are about corporations making record profits and fleecing customers. Surely that is what's causing inflation and not the trillions of dollars the government has been printing for the last 5-10 years!<p>Corporations are greedy, but they have always been greedy. This is just government using MSM to deflect blame.
It's really simple: Whenever we run low on labour, we slow the economy with interest rate hikes. So Labour can never get a raise because it never has leverage. But when the other factors of production run low (and their price goes up, specifically land, capital and entrepreneurship) we take no action. The result is that land and capital owners get all the benefits of growth, and labour get's none. This is how we choose for the system to work.<p>The fact people keep "discovering" this is quite confusing.
So my model of the <i>fuelling</i> of inflation is that after a priceshock, individuals and organizations alike attempt to figure in present and future price rises into their own pricing. If you can do that perfectly, than inflation stays constant, and its effects are minimised (because your real earnings are going up at the same level, interest rates will include the flat rate, etc). If you estimate too highly, then you end up with spiralling inflation -- but it's certainly safer for your own pocketbook. That's the major risk with high inflation levels.<p>I can completely believe that producers are able to adjust prices more quickly than the labour market, and can easily overshoot, but it doesn't seem to be a /moral/ failing, as this is being portrayed in some quarters. You can -- and may well, and probably should -- get the same effect from the consequences of wage negotiations during rising inflation. Neither of these are the /source/ of the inflation though; they're both elements of prices rising in the first place. I've seen this conveyed in economics memes with a chart of inflation labelled "greed of corporations over time".<p>I guess looking into it more, this belief that both wage- and corporate-driven inflation is a misconception is also shared by monetarists like Milton Friedman[1], though I can totally believe conservatives might want to push the wage-driven argument, and progressives the corporate-driven model.<p>[1] <a href="https://www.aier.org/article/there-is-no-such-thing-as-wage-driven-inflation/" rel="nofollow">https://www.aier.org/article/there-is-no-such-thing-as-wage-...</a>
Inflation is happening because of the continued printing of currency and an absolute refusal by all parts of the power structure to do anything that would decrease the amount of USD in circulation because it is politically unpopular.<p>And their not going to, the best thing you can do is park your wealth in assets which will continue to appreciate. Not even big things necessarily, instead of renting things like Rototillers or carpet scrubbers just buy the dang things.