Bitcoin Forum

Consumer prices are going up, but corporate profits are rising even faster.

Walmart, which announced third-quarter financial results this morning, was able to post better-than-expected earnings in part by offering fewer discounts to shoppers, but a lot of large firms have spent their recent quarterly calls bragging to investors about their ability to hike prices with relative impunity.

"What we are very good at is pricing," Colgate-Palmolive CEO Noel Wallace said. "Whether it's foreign exchange inflation or raw and packing material inflation, we have found ways over time to recover that in our margin line."

"We've been very comfortable with our ability to pass on the increases that we've seen at this point," Kroger CFO Gary Millerchip said in October. "And we would expect that to continue to be the case."

Corporations have a tendency to try and boost profit margins during periods of elevated inflation, The Wall Street Journal reported, and now is no different.

Roughly two-thirds of the largest publicly traded US companies have reported better profits this year than the same period in 2019, the WSJ found, citing FactSet data. Nearly 100 of those were performing at least 50% better this year than in 2019.

Former US Labor Secretary Robert Reich called this phenomenon a "symptom" of "the economic concentration of the American economy in the hands of a relative few corporate giants with the power to raise prices."

Inflation may be a problem for consumers, but the bigger issue is a lack of competition, Reich said.

"Corporations are using the excuse of inflation to raise prices and make fatter profits," he said.

American industries have gotten dramatically more concentrated in recent decades, diminishing the number of market competitors and increasing corporate price-taking power.

Corporate pre-tax profits as a share of total US output has also reached a multi-year high of 13.5% in the second quarter, which means that companies are taking an even larger slice of the economic pie. And that number is trending higher.

For example, consumer goods giants Unilever, Proctor and Gamble, and Colgate-Palmolive have remarkably similar portfolios of brands selling similar products, and each reported improved profits from higher pricing in the third quarter. Coca-Cola and PepsiCo also rolled out price increases around the same time.

This is not to say that there is illegal price-fixing going on, but having so few players in the game makes it a lot easier for companies to follow similar strategies.

Even the auto industry, which is pretty competitive compared with other consumer goods categories, is currently navigating its own version of the classic "prisoners dilemma" from economic game theory.

High demand and low supply has allowed most companies to boost profits by offering fewer discounts — a move automakers have wanted to do for decades — but the minute one company starts cutting deals to take market share, the others will soon face pressure to follow.

Input costs are indeed making it more expensive for businesses to provide goods and services, but the healthy profits that companies are taking in show that they're doing just fine as consumers increasingly see their buying power evaporate.

The remedy, Reich says, is not a higher interest rate from the Federal Reserve, which would likely slow down the economic recovery.

"This structural problem is amenable to only one thing: the aggressive use of antitrust law," he said.

https://www.businessinsider.com/corporations-using-inflation-as-excuse-to-reap-fatter-profits-reich-2021-11

Does anyone know which nations followed similar trends and what the eventual results were?

Is inflation on the part of the state responsible for negative financial and economic issues, or do corporations and the private sector bear the burden of the blame?

It is impossible for a company to increase prices at will without excess market power, perhaps because it monopolizes the market, unfair competition, and government support.  Usually this happens in countries that free the private sector to carry out their activities in the market without being controlled by the government.  The impact of inflation is not only due to financial stability problems but also the market itself.  Inflation is not always bad when referring to fiat glasses because the indicator of economic growth is inflation that is maintained.  This is proof that it is impossible for the time value of money to increase as it always decreases.

Your vendetta against corporations is misguided.

If the prices at Walmart are too high, then you can simply shop elsewhere. Nobody is forcing anybody to shop at Walmart. Profits are high because people continue to choose to shop at Walmart, even as they raise prices.

The source is probably written by some political activist with no understanding of economics.
...
The government will tell you its corporate greed causing inflation because it causes you to demonize free market economics and capitalism. They will do anything to shift blame away from themselves in causing an inflation crisis because the sad truth is, most people will believe corporations are responsible for the higher prices. After all, it's the corporations that determine what their products will cost, correct? The answer, of course, is no, it is a free market that determines the prices. And in a market with too large a demand due to increased money supply, the prices of the products increase.

natural resources aren't infinite, well most of them aren't so when that happens, the production of a product that has that problem will increase their prices. Also, corporations will pay more too when the inflation increases

According to this, the issue isn't overprinting of fiat currency or inflation. The issue is corporations raising prices to enlarge profit margins. They cite market centralization in some industries as a culprit and suggest anti trust laws against monopolies as the ideal method to break up unethical monopolies and encourage decentralization of the economy. There is another angle mentioned where centralized markets are accused of potential price fixing, which could set the stage for a future proposal of government price controls, gradual shift to a planned economy or stronger state nationalization of the private sector at a later date.

There is a strong precedent for many of these trends occurring in countries outside the united states recently. Does anyone know which nations followed similar trends and what the eventual results were? Is inflation on the part of the state responsible for negative financial and economic issues, or do corporations and the private sector bear the burden of the blame? I hope we can collectively figure out answers to these questions, and determine how to address them before they become too large and devastating to be prevented. The clock is ticking and time is not on our side, unfortunately.

According to this, the issue isn't overprinting of fiat currency or inflation. The issue is corporations raising prices to enlarge profit margins. They cite market centralization in some industries as a culprit and suggest anti trust laws against monopolies as the ideal method to break up unethical monopolies and encourage decentralization of the economy. There is another angle mentioned where centralized markets are accused of potential price fixing, which could set the stage for a future proposal of government price controls, gradual shift to a planned economy or stronger state nationalization of the private sector at a later date.

There is a strong precedent for many of these trends occurring in countries outside the united states recently. Does anyone know which nations followed similar trends and what the eventual results were? Is inflation on the part of the state responsible for negative financial and economic issues, or do corporations and the private sector bear the burden of the blame? I hope we can collectively figure out answers to these questions, and determine how to address them before they become too large and devastating to be prevented. The clock is ticking and time is not on our side, unfortunately.

So, basically, it's assumed that the prices are rising exactly in accordance with the inflation rate.

Yes, although in the supermarket sector they have more room for maneuver than in others, let's say furniture for example, where if they raise prices a lot and you were thinking of changing furniture you can go years without buying new ones.

With food, you can go to another supermarket, you can buy things cheaper and you can even fast, but in the end you have to buy food much more frequently than you buy furniture.


I was thinking something like that. I don't believe that all private companies are angelic beings either, but in a context of massive currency printing with high energy costs that affect all prices, it strikes me that the focus is on companies and not on government policies that are the main cause of inflation. It may be that some companies in some sectors can take advantage of this to inflate prices, but consumers' money is not infinite. If this were something that companies did across the board, in the end they would be forced to lower prices because people would run out of money immediately and would not be able to buy. With less demand you have to lower the price or you run out of sales.

My thought is so simple, why does the price of goods rise when inflation rises? the answer is the raw materials for production have also increased due to the value of money which is no longer valuable, and the funny thing is that the government when inflation increased during this pandemic did not even increase the minimum wage for workers. As a result, the wages they receive will not be able to meet the basic needs of their families. The current economic system is very cruel for those of us who are poor.

According to this, the issue isn't overprinting of fiat currency or inflation. The issue is corporations raising prices to enlarge profit margins. They cite market centralization in some industries as a culprit and suggest anti trust laws against monopolies as the ideal method to break up unethical monopolies and encourage decentralization of the economy. There is another angle mentioned where centralized markets are accused of potential price fixing, which could set the stage for a future proposal of government price controls, gradual shift to a planned economy or stronger state nationalization of the private sector at a later date.

There is a strong precedent for many of these trends occurring in countries outside the united states recently. Does anyone know which nations followed similar trends and what the eventual results were? Is inflation on the part of the state responsible for negative financial and economic issues, or do corporations and the private sector bear the burden of the blame? I hope we can collectively figure out answers to these questions, and determine how to address them before they become too large and devastating to be prevented. The clock is ticking and time is not on our side, unfortunately.

At the same time, do not forget - we ourselves will become the final assistant and acceptance of this rise in prices. If we continue to buy an unjustifiably expensive product - who is to blame? Corporations? No, we ourselves, paying our money for an unjustifiably risen product, say "yes, take our money, we like it, raise it more, we'll get it out of our wallets." Why not stop bulk buying such products? There are alternatives anytime, anywhere

Its domino effect towards that happening and only greedy businessmen gain from this and the one who suffer are those people who live on pay their pay checks so maybe its good for government to take action on this and always monitor on what oligarch does since if they let the rich men run the economy and the government will be their puppet then for sure the economy sinks and poverty will be rampant in the country.

The issue is corporations raising prices to enlarge profit margins.

Hihi, yeah let the blame game begin.
First the pagans than the Christians, the nobility then the kulaks, now it's the century where everything should be blamed on corporations, whatever that category would include.

The most ironic thing in this whole fiasco is that for once the actual inflation is only to be blamed on the or governments themselves, they are the ones who made all the moves with a lot of them pretty bad during the virus waves, and they're the ones with the shifting energy policies that triggered rises in energy prices and the main cause for price increases. But yeah, they need a scapegoat for being morons and of course, bussinesinsider who has turned into a propaganda mouthpiece that is against every free business environment lately is seeking any excuse possible for Biden's government.

Easy solution, let's blame the corporations for failed energy policies and money printing, then use the voting mob to slap them with more taxes, crush them completely, and after a few years be forced to either bail them out or use the entire economy crumble in pieces. History repeats itself over and over, complete with the fact that the morons in charge never learn anything from the previous failure.

Inflation is hiding behind lockdowns right now.  When (if) the world goes back to normal, inflation will spike and it will begin to show itself in everyday life.  

Right now, money is not changing hands enough for real price discovery.  Assets are in a bubble and commodities are all over the place.

Not at all.
The lockdown are the ones causing a lot of the inflation, offer, and demand, if you don't have enough poeple working to supply the needs for other poeple you have inflation even without money printing, there is simply no way to avoid it.
So if the wave passes and everyone returns to work a lot of sectors will actually start to see decreasing inflation, some prices might actually start going back as oversupply might kick in. Also in 3 months winter will be gone, in Europe's case, this will trigger a slowdown in demand for gas and fuel, and electricity, coming with higher production from the now zero in the useless solar panels Germany has spent billions on.


Nothing to do with common good inflation and price discovery has not that much to do with the velocity of money. The main drives between price discovery are the number of sellers and buyers, we already have these figured out since we have inflation.
If you're mentioning assets then maybe you're talking about valuation over cash flow, but this is of no relevance to inflation in necessity goods.

My country has quite an experience with the inflation. It was quite high not that many years ago and even now it's not so small.
We used to see how each time the USD price took a jump, the gasoline price did the same.
But there were periods of time the USD price was calming down, and slowly even falling. Guess what? The gasoline price most often no longer followed the trend.

My point is: inflation was always used an excuse for fatten the profits. It's nothing new really. Basically the new thing is that this time it happens also in U.S. of A.

I agree, corporations are never going to lose, if governments raise the taxes corporations have to pay,they will fire some of their employees, raise the prices of their products and still use their lawyers to somehow avoid to pay those taxes, so it is not surprising they are doing the same with high inflation, as such this should not be a surprise to anyone as this is a trend that happens all over the world, which in return generates more inflation creating a vicious circle in the process.

I agree, corporations are never going to lose, if governments raise the taxes corporations have to pay,they will fire some of their employees, raise the prices of their products and still use their lawyers to somehow avoid to pay those taxes, so it is not surprising they are doing the same with high inflation, as such this should not be a surprise to anyone as this is a trend that happens all over the world, which in return generates more inflation creating a vicious circle in the process.