Governments etc. argue that employees should not demand higher pay to match inflation to avoid a "spiral" out of the goodness of their hearts.

If employers catch the absolute currency value increase of inflation the employee employer balance is shifting.

As they should. that's how it works and they are correct. Employees should argue against that and demand more if they dare.

The job of Central bank is to increase interest rates until unemployment rate increases to the level where employees don't dare ask more. Unemployment reduces both demand and wage growth. That will slow down inflation but it also baits recession.

Economy is a dynamic system with feedback loops.

I might be old fashioned, but last time I checked, government's job was not to drive down living standards.

Maybe their job is to ensure that a resource-show like rising energy prices does not hit, by majing economy rsillient and relying on diverse suppliers

thats because you have been reading the government marketing materials instead of looking at what they do

Central Banks are generally tasked with setting one single, but very powerful, variable: interest rates. There's thought to be a pretty strong causal relationship between interest rates and unemployment.

The central bank absolutely knows that jacking up interest rates will, in the short term, drive down living standards. The trade-off is that it will also drive down inflation, which causes much bigger drops in living standards in the long term.

... Or so the theory goes.

You say as it's a bad thing. The mandate is public and set by politicians selected by people.

This "it's all bad" because politics stuff is jut nihilism.

There is so called "Natural level of unemployment" and NAIRU (Non Accelerating Inflation Rate of Unemployment) typically between 3% and 5%.

This is incorrect. The job of the Fed is to maximise price stability (which it defines as 2% inflation) and minimise unemployment (which it defines as the natural unemployment rate, to which we are close). There has basically never been a time when the Fed wanted unemployment to go up. (Keep in mind: unemployment != wage increases, though the two are related as are prices.)

Either the government is unable or unwilling to enforce this equally. If unable, they are incompetent, if unwilling, than they are corrupt. In either case we live in a corporatocracy not democracy.

EDIT: I mean advocating not just that we should avoid a wage/price spiral through other means, but specifically that individual workers should accept/volunteer for lower wages than they could otherwise get?

Edit 2: seeing several cases of "$Reserve_Bank_Person says wage increases are too high and need to come down", not a lot of "Please turn down your pay increase so we can fight inflation." The reason no one would actually say the second is it is a ridiculous collective action problem that is obviously unsolvable on the employee side. The Australia governor warned against a 5.75% pay raise for govt employees (I think), but he was addressing the employer in that case, not individual workers.

One of the more recent articles: https://www.reuters.com/world/uk/uk-annual-wage-growth-72-ex... Or here: https://www.theguardian.com/business/2022/jun/20/would-a-wag...

I didn't see any mention of calls for workers to accept lower wages in the first article. In the second article, such calls were mentioned but not explicitly referenced or quoted. (Maybe they would be familiar to a British audience.)

But I would say that is different than asking for private sector workers to accept lower wages as an inflation fighting strategy. And note that the actual fiscal policy that the UK has pursued is wage subsidies, as much as 650£ - 1000£ annually it seems. (As described in the second article, not something I'm familiar with beyond that.)

Ironically, they are most vehement when claiming wage rises in the public sector cause inflation, despite ethe evidence there being much weaker (or non existent according to many economists).

Telling workers to accept lower pay makes about as much sense as asking companies to accept lower profits. Yes you can ask but they will not obey.

https://www.bloomberg.com/news/articles/2022-11-15/uk-s-suna...

A central bank saying inflation is caused by high wages is exactly the same as the government telling people they should get a lower wage. There is no practical difference.

It is in fact worse, because the central bank tends to act on that phrase. So the government not only tells people they should earn less, but forces their hands into that.

You may think that is better or worse, but it is not appealing directly to workers to throw away their pay check.

https://www.nytimes.com/2023/04/28/business/wage-inflation-m...

Note that the main transmission mechanism of monetary policy in fighting inflation is basically putting people out of work, to the extent of provoking a recession if need be. So yes the fed is looking for some pain in the labor market to see that things are working, though they would love for inflation to come down without a recession too.

But high inflation is also bad for workers, because wages in general don't keep up in real terms (re-negotiated infrequently, leverage imbalance between company and worker, status quo bias, etc.). The higher inflation is the larger you can expect companies profit shares to be (case in point, the original article). Also really high inflation seems bad in general for the economy, both workers and companies.

that is, more of less, ahat bank of england has announced.

ok so you agree with the general thesis but not the exact mechanism? why quibble then?

https://www.canberratimes.com.au/story/8054911/rba-wants-wor...

In before someone argues that RBA isn’t part of the Australian capital-G Government, the organisation certainly is part of the governing institutions of Australia.

Austrian government for one because they're the pawns of the big industry. But I'm sure other governments too.

https://en.wikipedia.org/wiki/Nixon_shock#:~:text=Nixon%20is....

It also enacted price freezes and rations.

Now, of course, he's not saying to any particular workers "Hey, stop asking for much higher wages," but he says plainly in the final paragraph of the article:

> “The labor market … shows only tentative signs of rebalancing, and wage growth remains well above levels that would be consistent with 2 percent inflation over time,” he said. “Despite some promising developments, we have a long way to go in restoring price stability.”

How would you suppose workers are supposed to have wage growth "consistent with 2 percent inflation" if said wage growth were to greatly exceed that magical 2% number? This is the Fed literally saying "Please turn down your pay increase so we can fight inflation," except that there's also the implicit thread of "... or else we're gonna have to make sure a bunch of you lose your jobs so it all balances out. It'd be a shame if that happened, wouldn't it?"

Source?

[1] https://www.bloomberg.com/news/articles/2022-03-17/powell-tr...

Bailey's comments were squarely aimed at blaming Brexit and energy markets, people intentionally took his words out of context to bake up a "gaff".

“I’m not saying nobody gets a pay rise, don’t get me wrong. But what I am saying is, we do need to see restraint in pay bargaining, otherwise it will get out of control.”

Back in May, his Chief Economist Huw Pill got in trouble for expressing the sentiment thusly:

“Somehow in the UK, someone needs to accept that they're worse off and stop trying to maintain their real spending power by bidding up prices, whether higher wages or passing energy costs through on to customers,” which Bailey had to walk back.

Last week on Sky News, he was pitching a version of that same position, though, that balanced calls for wage restraint with calls for companies to exercises restraint on profit margins also:

“We've got to get and we will get inflation back to its target. To do that … we cannot continue to have the current level of wage increases, and we can't have companies seeking to rebuild profit margins which mean prices continue to go up at their current rates.”

How is that not directly telling workers to not ask for wage increases? I’d also say adding the word “chastising” is changing the tone of what the original commentor and I were referencing when talking about governments asking workers to not ask for wage increases.

"To do that I have to be clear – and we expect inflation to come down this year – to do that we cannot continue to have the current level of wage increases ... And we can't have companies seeking to rebuild profit margins which mean prices continue to go up at their current rates...But what I would say to people is we expect inflation to come down, and it is important then that price setting and wage setting reflects that."

Again, nothing "suggests" that he thinks workers are supposed to be blamed for wage increases being unsustainable. If anything he is blaming corporations!

Worker wages have been stagnant for a decade plus. Even the recent increases have been vastly outpaced by increases in prices AS EVIDENCED BY INCREASING PROFIT at companies that are increasing wages.

The problem is there is no price competition because most sectors of the economy are oligopolistic and have no interest in competing with each other one price at the moment.

Governments will blame businesses, consumers, employees, foreigners and bad weather. The only option ruled out is all the money printing going on and a good decade of regulators encouraging that and high-risk financial behaviour.

If inflation is high, it is a bad time to listen to governments.

Why complicate matters? I suggest we change it into: "It is bad to listen to governments"

Why are you ignoring a pandemic with associated measures such as lockdowns (although funnily, Sweden is very useful - they didn't lock down, they didn't print a ton of money, yet they're experiencing similar inflation to their neighbours), war in continental Europe, and the impact those had on global markets (higher costs of critical raw materials such as oil and gas, various metals, disrupted supply chains and bottlenecks, etc.)? Do you really think none of this matters, or do your political leanings tell you it's always the government's fault?

Sweden didn't lock down but they did print a ton of money. Compare money supply growth for UK vs Sweden. It's the same and occurred at the same time. Lockdowns weren't the only pandemic spending measures unfortunately. All governments everywhere massively pumped the money supply to pay for "whatever it takes" and now the bill has come due:

https://d3fy651gv2fhd3.cloudfront.net/charts/sweden-money-su...

> Do you really think none of this matters, or do your political leanings tell you it's always the government's fault?

Inflation is always and everywhere a monetary phenomenon, however, this basic insight is easy to get confused about because there's a large gap between theory and practice when it comes to this metric.

In theory inflation cannot occur without money printing, because a rise in prices of something like oil or food must be compensated by a fall in prices elsewhere as demand for that less essential thing disappears. People re-allocate their financial decisions towards the thing increasing in prices, businesses compensate by lowering prices to try and increase demand, it balances out.

Several things complicate this simple picture in practice.

One is that government inflation metrics don't include all prices. Indeed they cannot because it's too difficult to collect that data and prices constantly change. Also, governments like to play games with inflation statistics because if you can confuse people about inflation you get to pay for election pledges with money printing and then blame inflation on external factors, and because people tend to vote for whoever promises to spend more without raising taxes it's a quick way to hack democracy. So they usually define inflation only in terms of a small subset of all prices. If you do that then you can obviously have inflation even in the absence of money printing because you're ignoring the prices that fall.

Another problem is that in a sufficiently damaging period of price instability, some goods and services may simply cease being available. Everyone is spending all their money on heating their homes and other businesses go bankrupt as a consequence. At this point the price of the thing effectively goes to infinity, it just can't be obtained at any price, but that ruins the calculations and so governments do substitutions within the basket of prices, asserting that X is a substitute for Y even if in reality X is quite different (e.g. different kinds of meat). There are lots of hacks like these in how the stats are calculated.

Yet another problem is that money printing is somewhat circular in a fractional reserve system with very low reserve ratios and there are lots of feedback loops. If the government prints lots of money, then gives it to people whilst simultaneously banning the spending of it then it will appear they printed lots of money without causing inflation. When they stop banning the spending of it, that will show up as inflation even if the money printing has stopped. This is what's happening now, as governments shovelled money into people's pockets during lockdowns but there was nothing open to spend it on.

Nonetheless, we usually think of inflation has being caused by money printing because most of the time prices aren't being affected by wars or oil cartels and when that does occur, the prices which rise are being compensated by other prices that are falling or disappearing (which is a loss of wealth). It may just not be obvious.

This is silly, inflation existed before "money printing" existed as a concept. We had inflation when we had gold standard. Inflation existed even when we used physical gold coins to pay.

More plainly, the most important factor in the economy is velocity of money and you completely ignore that it exists. Higher velocity of money can allow inflation to rise, with a fixed supply.

1. Debasement of the currency (reducing the gold content of coins)

2. Gold mining

3. Stealing gold from abroad

That's why the Spanish Empire suffered hyperinflation after Cortez, because so much gold was brought back to Spain from the conquered South American tribes.

Yes, money velocity has an impact too but the main thing which can affect that is government intervention (like by printing lots of money and giving it to people who then save it - low velocity - and later start spending it - higher velocity).

If governments sell bonds to domestic buyers then indeed that doesn't create money, but in practice most bonds are bought by the central bank using printed money.

From extant currency.

What do the funds used to buy bonds do until repaid?

They back the newly printed currency.

You see, nothing is ever actually created.

Money is created from Commodities like wheat, corn, and metals, all of which are obtained in manners where the input cost is less than the output value with the additional value coming from a process in nature (sun and photosynthesis, or geologic actions for example).

You've clearly never actually done the flow chart, huh?

The money used for the bond is Taken Out Of Circulation and then new cash is printed.

The money already exists.

The value already exists.

It simply doesn't exist as Cash.

Theres a difference.

Really, do the effing flow chart.

>How are bonds repaid?

They aren't, the central bank indefinitely rolls them over.

What flow chart are you referring to?

Wow, that's purely disingenuous

Investors are absolutely paid back. Why do you think people buy them?

Really, given that and every other response so far I'm afraid Poe's Law is now in play.

You're a troll until proven otherwise.

>On the auction settlement date, the maturing Treasury securities are exchanged for the newly issued Treasury securities.

In net, the debt is only paid back when the central bank is actively reducing its treasury holdings, by rolling over less than the total amount of maturing debt. That is basically the reverse process of 'printing money', it takes the money back out of the wider economy.

>Why do you think people buy them?

Certainly 'people' buy them because they intend to get paid back, yes, but the central bank doesn't have the same motives. It increases and decreases the amount of treasuries it holds in order to control the money supply. That's the whole purpose of it holding treasuries.

Do investors get paid in exchange for returning the bonds?

Yes.

The fact that the government repeats the process is irrelevant to the simple fact that the Cash printed is done so by first securing an equal amount of funds to back them which is then returned with interest to the bond holder, inherently meaning that the Cash is not printed out of nothing but rather printed explicitly to represent real world value.

The amount of wealth in circulation and the amount of cash in circulation are not equal.

Wealth is constantly changing as new commodities and services are produced which create new wealth "out of nothing". You're engaged ina complete misattribution of cause and effect

At this point it seems intentionally deceptive...

Poe's law is in effect and I will begin treating you as a troll until proven otherwise.

All those issues will be resolved and the effects will disappear in times. The war will end. Supply chains will realign. And if those things matter, then at that point we would expect prices to come down at that point. You'd have to be naive to believe prices will come down. They aren't going to. This is not the first crisis in the last century and yet inflation is almost uniformly positive year after year. Governments are explicit in their policy-making.

Those things don't matter when identifying why prices tend to go up over time.

Meanwhile, my government mandates that ALL employees automatically get a raise matching inflation. No negotiation possible/needed; employers cannot refuse. Belgium.

Sounds great in theory; in practice Belgium competitiveness index and innovation index is lower than all its neighbouring countries; including France and post Brexit UK.

How does this work in practice? It is your wage is reviewed annually and adjusted, or more frequently? Do employers give raises for good performance or do you expect to just get a raise based on inflation?

Employers typically take this into account and reduce the performance based raise they give by the amount. It's great for the low performer or easily replaceable people who get a raise they otherwise would not have gotten and bad for the top performer / more sought after profiles because employer look at the total costs and thus have less legroom for individual increases. It acts as an equaliser in that sense; but the best and brightest are getting way more few kilometres away (it's not like Belgium is a huge country; almost every lives less than 1.5 hour away from the border).

For the companies that are less able to pay that automatic inflation; it can be pretty hard/expensive to fire, because the employment laws are quite protective. So the usual solution is to just not hire. Big companies are also finding ways to reduce their headcount and transfer the risk on smaller structure; such as using sub companies and franchising models. Thos inherently reduce employee job security and stability. Unions are fighting this as much as they can; without any success.

Companies that need local workforce (retail, ...) adjust their prices accordingly. As an example the same pack of pasta costs ~40% more in Belgium than in France. Many people take their car and drive significant distances to cross the border buy food.

How are the citizens in the least regulated doing on that front?

Yea....

Anyways, the device in question would simply not have existed if there wasn't for competition. His comment is thus evidence of its content being false.

Plenty of nation that are not lawless but are effectively unregulated in the matters being discussed.

And they do not fit your supposition.

Really...

Can you provide an example?

Worker protection against harrassment being a blatantly obvious one.

The type of discrimination women face varies from state to state. In 123 countries there are no laws to stop sexual harassment in education, and 59 countries don’t legislate against it in the workplace.

That lack of regulation inherently keeps women out of the workforce, specifically due to the lack of regulation.

Need I iterate more blatantly obvious examples?

You wrote:

>>>>How are the citizens in the least regulated doing on that front?

Now you're noting that some countries don't have specific workplace condition mandates. Not having said law doesn't mean they meet the ideals noted, of having laws establishing a free market, while lacking regulations that restrict voluntary exchange. To elaborate: in order to prove classical economists' and libertarians' claims about the free market being optimal are wrong, you'd have to show far more than these cherry-picked examples.

Your argument is sloppy, and when I request for more vigor, you lash out to create a flame war. This is not intellectual or scientific.

I'm absolutely justified in demanding you support your claims with evidence, and your belligerent responses are not justified, no matter how morally superior you believe yourself to be.

You said "Can you provide an example of poorly performing economies which "are not lawless but are effectively unregulated in the matters being discussed"?" And that's what I was replying to.

I provided an entire class of people who are harmed in such nations, of which too many exist.

Just because they don't share your preferences doesn't change the fact they meet the criteria you set forth.

I'd argue it's because economic productivity is not the only input into well-being and quality of life.

Put differently, do you think a lower quality of life is a worthwhile tradeoff if it raises productivity? What about the inverse?

Then why does it seem to be the exact opposite?

If fact, if you want competitiveness you need to prevent a fully free market.

No matter how many times this is explained, people still continue to make this incredibly simple and enormously consequential mistake.

If we're taking the reductionist view that economic output is the only important measure of society, then people need to understand that means maximizing competition not maximizing a free market.

I've seen no indication of that.

Isn't this just a cleverly worded tautology? It's like saying healthy people tend to live longer and happier lives. But is it actionable information? Not really.

No reasonable person could believe you're acting in good faith, right?

Really...

But your caustic response is anything but, so you've become the very thing you imagine me to be: a bad faith interlocutor.

If you can't see it then take a step back and analyze the thread until you can see how others would perceive your reply as such.

Anyone stupid enough to listen deserves all they get...

Yes, but let's remember this next time they are whinging about taxes, labor rights, and anti-trust measures, k?

Don't live in some day dream about what modern marketing can make the chimp brain do.

We could choose to have anti-trust measures with teeth. We could choose to tax assets. We could have progressive corporate taxes to encourage smaller company sizes and more public transparency. There are so many things we could choose, but the ones that we do choose are the ones that shareholders lobby into place to generate ROI.

This is either a feature or a bug, depending on whether your income flows through line 1 or line 7 of your 1040.

Because no one would actually be better off. Prices would instantly double. It's just a change of units, like going from getting paid in $ to getting paid the same amount in ¢.

This is so basic but so many people miss it. I have continually explained this to my parents. It doesn't matter how good your 401k is doing if it leads to eggs being $12 a dozen in your retirement.

There's zero reason why companies can't all just triple their prices right now, except that if they did, people wouldn't pay and their profits would drop. Companies constantly test consumer's acceptance of price increases and usually only increment their prices slowly so that the next generation they rip off doesn't know any better having always grown up with the slightly higher prices.

The supply shortages of the pandemic broke the system. It gave every company an excuse for price gouging, and at first, much of that was legitimate supply/demand and consumers were understanding. Then as the supply if goods came back they started using the inflation narrative (complete with "printed money" excuse) to justify further increasing prices, but now we have a growing pile of evidence that they were lying and were just pocketing the extra money.

> Every consumer has some idea of what things are worth and if a company tries to jack prices up for no reason consumers feel cheated and stop paying.

The recent inflation proves otherwise. Many costs have remained sticky for no added benefit. If this was true then we would never have inflation - because the inflation the last 2 years has been so extreme that your belief should have come to pass without any help and much earlier when the supply shocks subsided.

> Then as the supply of goods came back they started using the inflation narrative (complete with "printed money" excuse) to justify further increasing prices,

This just proves the point further - consumers continued spending despite the rising costs. But now you'll say they're only now started to feel ripped off? Seems awfully convenient for your argument, but isn't consistent. What is consistent is that raising interest rates have helped somewhat.

The fed is doing the right thing and yes it impacts wages as it impacts other asset classes. Again, if your eggs cost 300% more but your wages increased, it doesn't matter, in the end you're still likely losing.

You're right that we've never seen the effects of raising everyone's wages at once.

> This just proves the point further - consumers continued spending despite the rising costs. But now you'll say they're only now started to feel ripped off?

For the first two years of the pandemic, people weren't happy about the price increases at any point, but they were both desperate for the familiar comforts they'd been denied (due to lock downs, businesses being shutdown, or supply shortages) and also they understood that there was a unprecedented global crisis going on, so they expected that prices were higher due to issues outside of anyone's control. American households went heavily into debt to get the things they wanted and felt that they deserved after all they'd been through and sacrificed.

As soon as the supply started to return to normal consumers were flooded with messages about how inflation was driving up prices and companies said to consumers "We know our prices are higher, but it's not our fault! It's this damn inflation that's to blame! We're all in this together!" and so consumers felt they were being ripped off, but not by the companies. Instead they were told to blame the pathetic amount of disaster relief people got in the first years of the pandemic so that they could keep their rent paid and feed their families, and we see that even after all the evidence we have of companies making record profits there are still people in this very thread who blame "money printing" for the rising prices.

Companies were able to deflect blame very well, even as one by one, examples were coming out about how certain companies and industries making money hand over fist. Over the last year or so more and more people are starting to catch on and feel like they have been being taken advantage of, which they have been, but it's not a binary switch where every consumer suddenly stops paying for things that are clearly over priced. Many consumers have been buying less.

I know people who no longer buy goods they used to, or don't buy them as often because of the unfair prices. I myself have a list of companies I don't buy eggs from anymore because they were caught raising prices while blaming "bird flu" when they were not impacted by it. People do respond negatively to unfair price hikes, but in the last few years they were lied to and fooled into thinking that "We're all in this together" and are now in the process of learning that they were being cheated. That's what this article is. It's teaching people that they were cheated. Not everyone one will read it though. It'll probably take a while before most everyone understands that they have been being ripped off and start acting accordingly, assuming that they don't just feel defeated.

It's also harder for consumers to counter giant unnecessary price hikes when every company is doing it at once. If my kids want PB&J for school lunches, and every single company selling peanut butter raises their prices by $3, I'm kind of screwed! If the meat industry raises their prices again and again after pulling in record profits for the least two years I'm still stuck paying the price if I really want a cheeseburger. Lack of competition means that it's harder for consumers to get alternatives at reasonable prices, and for some products no alternative will be equal.

What I can say is that driving worker's pay down isn't going to cause a single company to lower their prices. It's just going to cause large parts of the US population to be priced out of things they could once afford. Companies won't care though. They'll charge everyone else more to make up for it. That means eggs still cost more, only now most people don't get to have them.

The source of the problem isn't wages, it's greed and until the source of the problem is addressed and dealt with every consumer, rich or poor, is going to suffer for it one way or another.

We just saw it - a year ago - and it coincided with the worst inflation in decades. Look at the 80s - same thing - high inflation and high wages go hand in hand. They're not to blame, per se, they're just a clear indicator of inflationary periods of time.

Of course it is nonsense to solely blame pandemic relief (vs years of cheap cash and PPP loans) for inflation. I don't think you give the American people enough credit. They're not stupid drones going around. They want to buy things, and they didn't care that it cost more. Companies caught on quickly (like anyone else would.) Compound that with the fact that most conveniences are staffed by wage slave jobs that most americans would turn their noses up at, then you have rich people waiting in long lines at McDonald's as opposed to cheaper options.

> The source of the problem isn't wages, it's greed and until the source of the problem is addressed and dealt with every consumer, rich or poor, is going to suffer for it one way or another.

No one is saying that wages are the source of the problem. They may contribute a small piece. In any case, railing against "greed" borders on the mythical. Why is the voracious apetite of many american consumers not considered greed, as well? Moral crusades have no place here, in my humble opinion.

It's worth noting that this mostly reflects short-term pricing power. It takes a lot of time for new competitors to enter any industry. So we should expect these price increases to occur rarely and be somewhat time-limited as competition ultimately reestablishes itself.

Google is hard to compete with due to network effects, because they don't often miss tricks, and because they've invested so heavily in core R&D for so many years. The classical story about competition is that a big rich company becomes complacent and stops improving their products, opening a gap for new companies to enter, but Google hasn't really done that, they continue to tweak and try new things (arguments about search quality specifically for precise programmer queries aside).

Amazon retail is hard to compete with because it's not a very good business. They keep margins extremely low for not entirely rational reasons, which is why most of their profit now comes from AWS. AWS meanwhile does have competitors.

Buying out and closing a completely private company is harder (though not impossible, given a right price).

There's not endless liquidity in the system (until rates go to zero again).

I mean market finds its way, people can move to small stores and non-branded products if it gets bad enough, but to paraphrase, market irrationality can outlast people's well being.

I'm not in favor of some more regulations which usually only help big players, but corporations power steadily climbs and I expect it to become bigger than those of governments.

New big companies, some decent competition, come from places when there was none. They hardly ever can push themselves into existing markets. They create new ones. But we still need groceries, gas, electricity etc.

1. https://www.reddit.com/r/coolguides/comments/elzqf2/eleven_c...

I buy almost exclusively store brands. Probably less than 5% of my grocery spending goes to name brands.

If groceries tomorrow cost 10x I would not suddenly be spending 10x my current grocery bill. Luxury purchases like snacks, soda, premade sauces, candy, off-season produce, would be on the chopping block. Anything non-perishable would be bought in bulk during sales and wholesale clubs.

And for people who are already scraping by it would result in a 10x grocery bill which they can now not pay.

There's only so much money you can squeeze from a stone in the long run. Rising prices like this changes consumer behavior but can't make money appear out of nowhere. Since food is one of the easiest ways to belt-tighten rising prices across the board has the risk of reducing the wallet share food producers have.

Unless by long term you mean waiting until the EU has a competitive economy. That's not what most economists do.

Companies raise prices whenever they can and lower them whenever they have to. Which is true for everyone - we demand higher wage when we can get away with it and suck it up with lower comp when we can't.

To your point, companies can't max out the prices whenever they want (or an apple would cost a hundred dollars - why not?) They have to deal with a world of consumers and competitive response.

As a consumer, my response to a raised price could very often be to drop demand (I like apples but not at a $100 per) which then punishes the overall revenue of the supplier. It also draws competition (I wasn't gonna plant an apple orchard in my back yard but now that apples are super valuable, I will. And I am going to undercut your $100 apples to get the business.)

In general this process has worked to generate an affordable plenty for us. Lamenting something at a narrow point in time is myopic.

Profits by definition are not passed upstream, as profits are what remains after you take out costs from revenue. Anything that gets passed upstream comes from costs

Some prices (mostly services) can be adjusted, some could be (rents, housing, mostly by rezoning and building more), but due to "reasons" (mostly local and national governments holding back) they aren't (until someone compares the average pension to average rent and instead buys a sniper gun and finds the responsible politician). Some prices are also stuck due to politicians doing their dick-measuring competitions ending in sanctions for countries that have stuff other countries need, and industries shutting down because that stuff became too expensive there.

On the other hand, we did print A LOT of money in the last few years, and blaming everyone else except (also) the ones who have the power to print is just stupid.

There's also a shortage of workers in most developed countries too, which means that any labour used to provide luxuries directly impacts the amount available to produce the basic necessaties like housing and healthcare as well.

https://tradingeconomics.com/united-states/core-inflation-ra...

Energy didn't become a major issue until Ukraine was invaded.

Inflation was triggered by all the money printed during COVID getting into the economy once it opened up again.

The fact that labor costs (which are part of a company's profit calculation) are considered a separate "driver" makes this even more confusing.

You say that prices go up because they can, and that's not wrong, but historically there were other providers also competing. It feels like there has been massive consolidation across industries, and that this centralization has created uncompetitive markets, where consumers don't have any option but to accept a providers price & profit increase.

That feels like the new thing, the new trouble: only the very large are left. Competition does not renew: even if there are fat profit margins waiting to be had, the risk of trying to start a new competitor is too high, too likely to get crushed, has too many personal risks (trying to provide healthcare for your family, not go bankrupt, etc).

The markets have ossified into a state where this ruin you speak is possible.

But that doesn't mean that we can't hate the game.

Capital-isms and market competition are two very different things.

Currently we have A LOT of capitalism AND very uncompetitive markets.

What we need are competitive markets, and the -isms hawked by the multi-generational holders of Capital be damned. (Which, these days, put far less stress on competition than they typically did in the late 20th century. See: Venture Capital-ists clamoring for regulation in greenfield markets, on the explicit basis that too much competition is dangerous!)

What does this look like? Primarily:

1. Stronger anti-trust laws,

2. more anti-trust enforcement,

3. assurance that labor markets are efficient,

4. lowering the barriers to entry for new competition, and

5. substantially shifting the tax burden in the meantime.

Stronger anti-trust, stronger worker's rights, more equitable ownership of firms/real property/capital, etc. -- none of this requires hate, and most of it is actually entirely consistent with the bedrock principles of late 20th century Capital-isms.

I've been bemoaning lately the degree to which we ('ordinary folks' as they say) are essentially shut out of whole industries.

Want to open a grocery store and go against the local Kroger? A drug store and go against the local CVS? A hardware store and go against the local Lowe's?

I think the only way I can get into the new-car dealership aristocracy here in LOCAL_TOWN_USA is to marry into it.

Restaurants, nail salons, small trades, franchisee.... It's good that they left us a few scraps I guess.

I do not see a path toward technological upheaval. If anything, exactly the opposite. E-commerce proved to be winner-take-most, and for anything in the real economy it's yet another significant capital input required to compete.

I think the next 100 years will prove to be a real stress test of the "elections not revolutions" hypothesis regarding representative democracy. Both Europe and the USA failed the last several attempts at peaceful major social upheaval, so I'm unfortunately not holding my breath...

In order to change some thing you have to prove that it’s happening.

In the case of “What underlying structure creates society’s problems,” increasingly more research is pointing to inequality itself and lack of democratic participation/ownership in the economy. These are the foundational factors driving poverty and precarious economic conditions for an increasing proportion of the population.

The Lions share of corporate profits go to existing shareholders and only rarely employees, and even rarer do employees compose the majority of shareholders (you have no shareholder power as a FAANG employee different than any other retail investor - namely, none)

So no it’s not irrelevant. It’s very relevant if people want to actually have power in determining how the organizations they join are operated.

If we had 50 competing players, there would be enough incentive for a hungry challenger to lower prices and undercut the competition. Except, over a decade of leveraged acquisitions and antitrust regulators being asleep at the wheel killed the most remote chances of this happening in our lifetime.

A better question might be: what hinders this process today? Capital disparity plays a role (a wealthy company can perhaps make a competitor a buyout offer they can't refuse, or temporarily lower prices to try to kill them), but another major cause is excess regulation and the weaponization of intellectual property.

So they sell the stock of the company that is wringing out excess profits just as they are putting money into the “disruptor” that is going to capture all the consumers leaving company #1.

Now ensure that you push for a decade of overleveraged growth and regulatory capture (ensuring you don’t get diluted the same as the founders) and now you have shares of an entrenched quasi-monopoly - your task again now is to demand margin increases and stock buybacks in order to exit your position and buy your name on the local college library.

Wash rinse repeat all while taking money/risk off the table personally each round so when it collapses finally and the companies are finally ground into dust, you and your family have long exited and are onto the next thing.

For example, if Amazon has a monopoly, why haven't capitalist profiteers bled it dry yet,

And then the winner just lowers them, now what?

The answer is the former then we should remove governmental barriers to competition. If competitors can't theoretically undercut the price, then it's hard to see how more competition would favor the buyers. Surely they're not better off with 10 competitors at Double the price.

Last, there is the issue of time. Competition doesn't happen overnight

A reason why a new competitor might not be able to compete on price is because of capital disparity. The winner can lower prices, buyout the competitor or if that fails they can always turn to buying out distributors/suppliers/key employees of their competitor

The economy must go in growth/bust cycles, where growth brings out new ideas, and bust cleans up the inefficiency. And keeping it decentralized keeps busts manageable.

But if you instead let everyone merge during good times, and then bail them out during bad times, the next good times will never happen - the incentives are all wrong!

Most markets have never had more than 3-5 major competitors in them because beyond that it gets too hard for customers to differentiate between them, too hard to understand all the available brands etc.

But this depends on a lot on where you draw the boundaries of the market. There probably aren't more than 5 good Chinese restaurants within walking distance of where you live even in a city, for example. But over the whole city there are many more. There are only ~4 main cloud providers globally, but if you expand your definition of the market a bit further there are many more.

In practice for price competition to exist you don't seem to need more than 3-5 players. For example Oracle offer a generous free tier in the cloud space.

You spend the rest of the degree learning history & how to model when you don't have the simplifying assumptions

Economic power, and therefore political power, is concentrating in fewer and fewer hands which allows them to exercise force over competition rather than to compete with competition.

Competition is the back pressure on "greedflation" which is a name that implies greed (which is good in capitalism) is the root cause of increasing prices rather than lack of competition (regulatory capture/citizens united).

It boils down to consumer/labor power.

Labor power represents the ability to make companies compete through regulation or to put the profit these companies reap into labors pockets instead of owners pockets, which is not just a shift of economic power, but of political power. Wages have nothing to do with your labor and everything to do with your market power. Companies collude behind the scene to suppress wages: https://news.ycombinator.com/item?id=29834753 There are companies that sell "market data" which tells companies how much labor should cost.

Unions are the answer to oligopolies and oligarchy. Unions are what you can do, not what somebody else needs to do, or what the government needs to do. Unions are a vehicle of force. Unions are like the 2nd amendment. You can use both to fight tyranny, and in the process put yourself at risk. Trying to make the powerful less powerful requires risk because the powerful will use their power to keep their power.

These oligopolists (https://en.wikipedia.org/wiki/Oligopoly) are exercising tacit "collective bargaining" but people who earn money in proportion to time seem unable to do their own collective bargaining.

Until there is back pressure on corruption, which requires exercises of power against the corrupt, we can expect things to get worse and worse and those with power to be able to leverage the rules of society to grant themselves more power.

The idea that discussing widening margins is "irrelevant" because companies adjust prices based on consumers' price sensitivity seems exactly backwards to me: the fact that profits are so high indicates that consumers have been overly-credulous and ought to be more price sensitive. And zooming out, the accelerated transfer of wealth from consumers to shareholders happens because we consumers collectively allow it. Reporting which highlights the rising profits relative to other factors can be part of what enables a course-correction.

How do I become more price sensitive to food prices? I already had to start eating less and worse.

I used to be the conference directory for a college club sport (specifically, paintball).

Part of my job was to find paintball fields to host college events. It's important at to say that the organization that funded these events was 501(c)(3) aka "non-profit" and we therefore were trying to minimize costs.

Something we ran into was this scenario:

- Fields knew we were college focused and a non-profit

- They would generally, out of the goodness of their hearts, charge us at cost or even below cost for our events

- This would sometimes mean turning away hosting events or players with better margin. You could argue that the fields received great free advertising by hosting events so it wasn't a net loss for them.

- That being said, we sometimes saw events coming back the next year saying "it wasn't worth it to host your event"

- This was a problem given that there were only limited fields AND I had a full time job at the time so, ideally, we would use the same field every year

- I would therefore add 10% to whatever cost the fields proposed to us as a "tip"/"return fee" to make sure they were happy

Now, you could argue that my job was to make sure that we always received the lowest possible price given our constraints on field safety, size and location.

I would argue that was ignoring the long term cost to the organization (and my time) to having to keep finding fields that would host us if we tried to minimize cost.

I mention this b/c companies maxing out profit to whatever the customer can bear feels like an excellent short term strategy. If by doing so, they drive customers into debt and then bankruptcy etc, this seems like a net loss to everyone on the longer timescale.

To finalize and maybe clarify: these discussion always seem to end up in a "well, companies maximize profits!" while ignoring the negative long term implications of that strategy.

https://en.wikipedia.org/wiki/Efficiency_wage

https://www.investopedia.com/efficiency-wages-5206757#:~:tex....

Were they actually a charitable organization, or a non-profit? Because those are not the same.

The Firefighters Association at my fire department held a 501(c)(3) for years, but were not inherently meant to be (because although we didn't solicit outside donations, and did do community service/donations, we also used association funds to do things like member events).

Quoth the IRS, Publication 557:

Purposes deemed to be eligible: - Religious

- Charitable

- Scientific

- Testing for public safety

- Literary

- Educational

- Fostering of national or international amateur sports, and

- Prevention of cruelty to animals and children

It’s like companies shifting the burden of their plastic waste onto consumers by telling them to recycle rather than providing a better, less polluting product.

that’s true for essential goods as well, something would have happened to those people that couldn't pay but they do have money and can still pay

that’s the other half of inflation

I think this is a core part of the anti-competitive problem, though. Economies of scale mean that a company with a 50% market share is going to make the cheaper good, all else equal.

We would effectively need to increase competition at the cost of increasing efficiency to make that work (e.g. by banning mergers of larger players).

Only works because dealerships have a monopoly over local sales (i.e. not a free market). Otherwise everyone would be buying their car online without the markup.

Many of those companies will be producing superior products, niche products vital for a small market or are simply more focused on delivering value rather than leeching profit.

The surviving companies in a rough market turn never seem to be the ‘best’ companies.

No, upstream price increases are included as a part of their increased expenses. Any increase in profits is on top of this.

The way you can tell this is true is price any car or truck in the US for sale from dealer X. Then attempt to shop around for a better price from set of dealers Y-Z. You will find that within a convenient-to-you radius the same regional dealership operating co owns all of the dealerships for your preferred make/model.

Then if you expand your search radius you will find that opco is owed by a larger holdco, which "oversees" supply and demand so your price. Not a free market. And not the manufacturers' doing, or their input suppliers, or inflation. It's a gov policy choice as abused by nearly a century of lobbying which some might call bribes.

As I recall the other US industries with explicit antitrust exemptions are Major League Baseball... and domestic shipbuilding vis-a-vis domestic maritime commerce. This is famously why the Love Boat *had* to go to Mexico, because it was (presumably) foreign flagged and couldn't move between US poets without calling at a foreign port.