Inflation Is At 0%

[Derec]

And if anyone thinks it wasn't also companies padding their profit margin amongst all this chaos is naive.

Companies most certainly did pad their profit margins. But that was the consequence of rising inflation, not the cause of it.

 

[laughing dog]

How much of the inflation is simply a rebound from the time the economy was slowed by Covid?

Most of it. But the rebound was supercharged by all the extra federal spending such as extended unemployment and child tax benefits that went on long beyond when the economy reopened.

If most of inflation is not due to the "extra federal spending", how does that spending "supercharge" inflation?

 

[Derec]

If most of inflation is not due to the "extra federal spending", how does that spending "supercharge" inflation?

I do not know if it is "most" or just under it, but extra federal spending was definitely a major contributor to inflation.
It did supercharge the rebound Loren was talking of.

 

[ZiprHead]

And if anyone thinks it wasn't also companies padding their profit margin amongst all this chaos is naive.

Companies most certainly did pad their profit margins. But that was the consequence of rising inflation,

???

You'll have to explain how raising prices far more than necessary is a "consequence" of inflation. I do not think that word means what you think it means."

not the cause of it.

How could it not contribute to inflation?

 

[Derec]

You'll have to explain how raising prices far more than necessary is a "consequence" of inflation. I do not think that word means what you think it means."

Prices rise due to a mismatch between supply and demand. When supply is restricted and demand rises due to all the federal stimulus, prices naturally rise. If consumer prices rise faster than corporate costs, the result is higher profit margins.
No conspiracy of mustache-twirling greedy capitalists is required to explain this.

How could it not contribute to inflation?

Because prices rise first, as a consequence of supply/demand mismatch. Companies realizing more profits is a consequence of the rising prices. '
It's basically a post hoc, ergo propter hoc fallacy.

 

[laughing dog]

You'll have to explain how raising prices far more than necessary is a "consequence" of inflation. I do not think that word means what you think it means."

Prices rise due to a mismatch between supply and demand. When supply is restricted and demand rises due to all the federal stimulus, prices naturally rise. If consumer prices rise faster than corporate costs, the result is higher profit margins.
No conspiracy of mustache-twirling greedy capitalists is required to explain this.

How could it not contribute to inflation?

Because prices rise first, as a consequence of supply/demand mismatch. Companies realizing more profits is a consequence of the rising prices. '
It's basically a post hoc, ergo propter hoc fallacy.

Not if the restriction in supply is due to market power.

 

[Derec]

Not if the restriction in supply is due to market power.

Supply restriction first happened in services because most in-person services shut down or were severely restricted in the early months of the Pandemic. Then the supply chain crunch restricted supplies of goods. That tanker getting stuck in the middle of the Suez Canal did not help matters either.

Where do you have the idea that the supply chain issues were due to "market power"? Did Taiwanese semiconductor fabs use their "market power" on purpose to inflate US used car market? Did the CEOs have a lot of 2010s Fords to unload or something?

 

[ZiprHead]

You'll have to explain how raising prices far more than necessary is a "consequence" of inflation. I do not think that word means what you think it means."

Prices rise due to a mismatch between supply and demand. When supply is restricted and demand rises due to all the federal stimulus, prices naturally rise. If consumer prices rise faster than corporate costs, the result is higher profit margins.
No conspiracy of mustache-twirling greedy capitalists is required to explain this.

So it was inflation that caused so many corporations to experience record breaking profits. I knew that just had to be it.

How could it not contribute to inflation?

Because prices rise first, as a consequence of supply/demand mismatch. Companies realizing more profits is a consequence of the rising prices. '
It's basically a post hoc, ergo propter hoc fallacy.

So you're saying rising costs cause more profits because they just had to raise their prices far more than their additional costs because of inflation. I don't think there is an eye roll big enough.

 

[Elixir]

You'll have to explain how raising prices far more than necessary is a "consequence" of inflation. I do not think that word means what you think it means."

Prices rise due to a mismatch between supply and demand. When supply is restricted and demand rises due to all the federal stimulus, prices naturally rise. If consumer prices rise faster than corporate costs, the result is higher profit margins.
No conspiracy of mustache-twirling greedy capitalists is required to explain this.

How could it not contribute to inflation?

Because prices rise first, as a consequence of supply/demand mismatch. Companies realizing more profits is a consequence of the rising prices. '
It's basically a post hoc, ergo propter hoc fallacy.

BS. Most Companies reporting record profits are doing so as a result of opportunistically increasing their margins with forward-looking price increases, not just inflation-related increases in their gross sales. That way if inflation continues or worsens they’re okay, and if it abates even a little bit on the supply side - KA-CHING!
They’re causing their own excuse for predacious pricing. Of course that element of inflation will be the last to cure, too.

 

[laughing dog]

Not if the restriction in supply is due to market power.

Supply restriction first happened in services because most in-person services shut down or were severely restricted in the early months of the Pandemic. Then the supply chain crunch restricted supplies of goods. That tanker getting stuck in the middle of the Suez Canal did not help matters either.

Where do you have the idea that the supply chain issues were due to "market power"?

In the real world, not the comic book world you describe, a number of influences affect economic activity. Market power in some industries allowed companies to take advantage of initial supply restrictions.

Did Taiwanese semiconductor fabs use their "market power" on purpose to inflate US used car market? Did the CEOs have a lot of 2010s Fords to unload or something?

That appears to be another example of comic book thinking that there is only one cause that influences economic activity. OF course, it could just be pure babble.

 

[Cheerful Charlie]

How much of the inflation is simply a rebound from the time the economy was slowed by Covid?

Most of it. But the rebound was supercharged by all the extra federal spending such as extended unemployment and child tax benefits that went on long beyond when the economy reopened.

If most of inflation is not due to the "extra federal spending", how does that spending "supercharge" inflation?

Ronald Reagan repeatedly made this claim when he ran for president. Deficits cause inflation! Reagan gaves us big deficits and wild and crazy spending. Paul Volker's policies put and end to Regan era inflation. Reality is often different from politics. Especially right wing politics.

 

[RVonse]

Inflation has seemingly been tamed. Now if the GOP will please not screw this up.

.....
Economists and investors are cheering over news the consumer price index shows inflation was zero for the month of October, meaning prices on average did not rise.

"Inflation's receding, baby," exclaimed professor of economics and Brookngs senior fellow Justin Wolfers. "Headline inflation was literally zero -- on average, prices were the same in October as September. Over the year, headline inflation is 3.2%, beating expectations of 3.3%."
......

‘Inflation was literally zero’: Economists thrilled with latest report

Economists and investors are cheering over news the consumer price index shows inflation was zero for the month of October, meaning prices on average did not rise."Inflation's receding, baby," exclaimed professor of economics and Brookngs senior fellow Justin Wolfers. "Headline inflation was...

www.rawstory.com

I guess you and the professor (senior fellow Justin Wolfers) must not have heard the auto workers recent 30% wage increase. A 30% increase in the price for a new car does not sound like zero inflation to me. Not saying these workers don't deserve their raise but if you think car prices will remain where they are today (which is ridiculous expensive already) you are nuts.

Have you and professor went out to eat lately? You need to bring a suitcase full of cash just to pay the bill before the 25% (which is what is expected) tip. And if you think you can skip the tip at fast food establishments lacking service .....think again. Its just too bad cash is not edible, because if it was you would more easily fill your self eating the cash than what it will buy.

The inflation is real, its not transitory, and its not going away either.

 

[laughing dog]

Inflation has seemingly been tamed. Now if the GOP will please not screw this up.

.....
Economists and investors are cheering over news the consumer price index shows inflation was zero for the month of October, meaning prices on average did not rise.

"Inflation's receding, baby," exclaimed professor of economics and Brookngs senior fellow Justin Wolfers. "Headline inflation was literally zero -- on average, prices were the same in October as September. Over the year, headline inflation is 3.2%, beating expectations of 3.3%."
......

‘Inflation was literally zero’: Economists thrilled with latest report

Economists and investors are cheering over news the consumer price index shows inflation was zero for the month of October, meaning prices on average did not rise."Inflation's receding, baby," exclaimed professor of economics and Brookngs senior fellow Justin Wolfers. "Headline inflation was...

www.rawstory.com

I guess you and the professor (senior fellow Justin Wolfers) must not have heard the auto workers recent 30% wage increase. A 30% increase in the price for a new car does not sound like zero inflation to me. Not saying these workers don't deserve their raise but if you think car prices will remain where they are today (which is ridiculous expensive already) you are nuts.

There is no reason to expect that a X% compensation increase will cause the same percentage increase in the price of the cars.

Have you and professor went out to eat lately? You need to bring a suitcase full of cash just to pay the bill before the 25% (which is what is expected) tip. And if you think you can skip the tip at fast food establishments lacking service .....think again. Its just too bad cash is not edible, because if it was you would more easily fill your self eating the cash than what it will buy.

The inflation is real, its not transitory, and its not going away either.

Prices are higher today but inflation - as measured by the CPI - for October was zero. Now, that does not mean inflation as measured by the CPI will remain at zero. What it does mean that for October, the price level - as measured by the CPI - did not increase. It says nothing about what happened in the prior months.

 

[TV and credit cards]

Here’s why the Big Three won’t need to raise car prices to pay for these labor deals

Part of the reason is that labor makes up only about 7% of the overall cost of building a car.

 

[bilby]

the auto workers recent 30% wage increase. A 30% increase in the price for a new car does not sound like zero inflation to me.

A 30% increase in wages doesn't imply a 30% increase in prices, not least because wages are a small part of total costs.

Or do you think that Ford and GM get free steel, free rubber, free power, and free machinery that they use to build cars in their free factories on free land, where they pay zero taxes, before shipping the finished vehicles at no cost to dealerships that market them free of charge?

All of these things (and many more) would either have to cost them zero dollars (or rise in perfect lockstep with the wages of the UAW employees), for the relationship you are asserting to be correct.

And to describe this pay deal as "a 30% increase" is irresponsible and misleading reporting. They actually get 11% now, plus a commitment to a further 14% over the next four years.

So in the real world, an 11% pay increase for UAW employees adds a tiny percentage to the retail cost of a new car, and may add nothing at all to the price. Cost is largely outside the corporation's control, but price is entirely determined by them. The only constraint is that they're unlikely to want to sell very many units at less than cost.

To suggest that this implies a 30% increase in per annum wage costs (inflation is a per annum figure) is utter nonsense. And alongside the suggestion that this also implies a 30% per annum increase in retail prices for their products, this idea is nonsense squared.

Labour is about 10-15% of the cost of an automobile*. Assuming (big assumption) that the entire cost of the 11% pay increase this year were to be added on to the retail price of a car, the increase in car prices as a consequence of this "30% wage increase" would be 1.1 to 1.65% this year, which is below the Fed's 2% inflation target. The increase in subsequent years is rather lower again.

You really need to learn how to think for yourself before becoming outraged, if you're going to keep your blood pressure at a safe level in a world in which you are bombarded by this kind of nonsense squared propaganda.

Cars aren't going to be the source of above target inflation as a result of this pay rise, even if cars were a large fraction of people's annual spending, which (as most people don't buy a car every year), they certainly are not.



*ETA - if the figure quoted above of 7% is correct, and I have no reason to say it's not, then the implied cost increase is well below 1% (0.77% to be precise), and still there's no reason to expect it to be entirely reflected by any price increase.

 

[Loren Pechtel]

How much of the inflation is simply a rebound from the time the economy was slowed by Covid?

Sure it was that. It's like liberty call after months out at sea. Everyone had money in their pockets. Everyone spent like sailors. Only difference being sailors out at sea don't whine like little bitches that they want to go out and play.
And people seemingly do not want to slow the party as consumer debt levels are rising. We'll see how Christmas spending goes this year.

It was also demand for shipping.

It was also China not coming out of covid restrictions the same time as the west.

And if anyone thinks it wasn't also companies padding their profit margin amongst all this chaos is naive.

I'm not claiming it was all rebound, I was wondering if we know how much is.

I don't think China's Covid restrictions had much effect most of the time--China was keeping it under control and while it was a major barrier to travel it didn't impact production or trade. When they got overwhelmed by Omicron, though, there certainly was some issue because Beijing wasn't willing to admit their strategy didn't work anymore.

 

[Loren Pechtel]

And if anyone thinks it wasn't also companies padding their profit margin amongst all this chaos is naive.

Companies most certainly did pad their profit margins. But that was the consequence of rising inflation,

???

You'll have to explain how raising prices far more than necessary is a "consequence" of inflation. I do not think that word means what you think it means."

not the cause of it.

How could it not contribute to inflation?

I think what he's talking about are the supply chain shocks. There were legitimate shortages of many things, prices rose as a result. While the high surge is gone many of them did not return to anything like their baseline levels. Consumer resistance points were changed and companies took advantage of it--pretty much all my pre-pandemic measures of what constitutes a good deal went out the window.

This isn't the companies causing inflation, but rather refraining from causing deflation.

 

[Loren Pechtel]

Not if the restriction in supply is due to market power.

But there's no indication that that's the case. You're just throwing out a red herring.

 

[laughing dog]

Not if the restriction in supply is due to market power.

But there's no indication that that's the case. You're just throwing out a red herring.

The irony is overwhelming. Market power works through restricts supply.

 

[Swammerdami]

Price rises can be temporary. If a widget selling for $100 rises to $105 because of supply issues, the price might fall back to $100 when supply is normalized. This is very different from a permanent price rise, where the widget's price remains at $105.

(And of course, either of these cases is quite benign compared with chronic inflation where the widget's price continues to rise -- $110, $115, $120 ... -- year after year.)

And if anyone thinks it wasn't also companies padding their profit margin amongst all this chaos is naive.

Companies most certainly did pad their profit margins. But that was the consequence of rising inflation, not the cause of it.

Wrong again. Companies that repriced their widgets at $105 -- or more likely $110 while still blaming supply shortages -- often did NOT drop their prices when supply normalized. This converts a temporary supply shock (which does NOT affect prices long-term) into a permanent price rise. That corporations are able to make their price rises permanent is the result of oligopolic structures in American capitalism.

Perhaps Derec is unaware that SEC-regulated corporations make their financial data public. Instead of pulling ideas out of their asses, serious analysts can determine profit margins by ... (did you guess?) ... actually looking at actual numbers!

The details of economic causes and effects are not well understood, and even Nobel Prizewinners may disagree with each other. Such disagreements arise despite that these professional economists actually look at actual numbers!! Perhaps IIDB should be grateful that we have a distinguished economics scholar who doesn't even need to waste his time examining actual data.