Profit not inflation

[bripat9643]

It is sort of cool how you make up your own definitions of words so you can call everyone else names.

I don't make up my own definition of words. I use the definitions that were in use before Marxists took over our universities.

 

[colfax_m]

Exactly my point! It didn't cause inflation because the velocity of money plunged.

Now the velocity of money is picking up dramatically. Consumer demand is surging.

Presto, inflation.

My bad.

Thanks for the clarification.

 

[g5000]

Inflation is the progressive increase in prices of goods and services in an economy. If companies are increasing prices to increase profit, then inflation is occurring.

Rising prices don't always correlate to inflation.

Inflation is one of the most misused words in economics. As economist Michael Bryan carefully explained a few years back, the word originally described currency and money, not prices. It referred to a rise in the amount of paper currency in circulation relative to the precious metal (or money) that backed it. Later, the term referred to the amount of money in circulation relative to the amount actually needed for trade. Today, however, people typically use the word to refer a rise in some set of prices or even in a single price, with no necessary connection to money at all. So now we have countless types of inflation: oil-price inflation, healthcare inflation, wage inflation. The unfortunate outcome of this evolution is that the public no longer distinguishes between two very different types of price pressure.

Strictly speaking, inflation refers only to a drop in the purchasing power of money that results when a central bank creates more money than its public wants to hold. Inflation manifests itself as a rise in all prices and wages—not just some subset of prices. People, of course, use money to conduct their day-to-day transactions, and their demand for money generally expands as the economy grows. If the public’s demand for money grows at, say, 3 percent per year, but the central bank creates money at 5 percent per year, then all prices and wages will eventually rise at 2 percent per year. Prices will keep climbing as long as the disparity between the supply and demand for money continues.

Rising Relative Prices or Inflation: Why Knowing the Difference Matters

Almost everyone uses the word inflation to refer to any increase in prices, but it ought to be reserved for a just one kind of price increase.

www.clevelandfed.org

 

[g5000]

Inflation is simply the cost of goods going up. That's how it's defined.

No. Not always. See post 63.

 

[g5000]

I can't open the graphic. Can u post a link to the website? Thanks

Economic indicator: US Velocity of M1 Money Stock

www.tradingsystems.it

 

[g5000]

There was inflation the whole time, dumbass.

Not even close to what we are seeing today.

 

[g5000]

The printing of money and the inflation has been here in the stock market and housing for many years. Inflation can be exported also as we are the reserve currency of the world although the percentage of it used continues to decline as we decline as a nation.

The entire world's central banks have been in a race to the bottom. They have all been printing money like it is going out of style.

 

[g5000]

Just look at the value of the dollar since the creation of the Federal Reserve. That makes the relationship quit clear. It has fluctuations because of changes in the propensity to save or spend money. That's all.

The Fed's mission is to keep inflation at 2 percent to allow for economic growth.

The reason QE was started in 2008 was to prevent deflation.

 

[g5000]

If the Fed starts contracting the money supply (by raising interest rates) to reduce inflation, money becomes more expensive to borrow and people stop spending.

Boom. Recession.

The Fed has placed itself between a rock and a hard place.

Our politicians like inflation, despite what they are telling you. Inflation reduces unemployment and makes the federal debt easier to pay off.

They don't give a shit if your paycheck is worth less in the afternoon than it was in the morning.

Anyone who thinks Congress should have control over the money supply instead of the Fed is naïve. Those assholes would turn the dial all the way to 11.

 

[Dragonlady]

I wasn't sure about putting this in the political section but it does all come back to this. For over 12 years we have had economic policies that piled trillions of dollars into the markets. Now with talk of pulling back on that, the record increases are addictive and must be supported it would seem.

This article (not from a highly biased site) is noting that much of the increase in prices is simply business chasing yearly record profits.

Fattest Profits Since 1950 Debunk Inflation Story Spun by CEOs

This is really a huge issue and I think politics is the right place for it.

Back in the 70's, when I was applying for an MBA program, I read an article that said that the bottom line management being promoted by the Harvard Business School would be the destruction of the American economy since it ignored HOW those profits were achieved and the effect on the community as a whole. There was no "good citizenship" or responsibility to the employees or the community involved. It pits management and labour against one another in wage negotiations since management must always try to improve the bottom line and not look at what's "fair" or reasonable.

At the time I read this article, I was applying to University of Western Ontario whose business program was based on the Harvard program. I thought this guy was utterly deranged, but his words have haunted me ever since as I watched his worst fears play out.

While Walmart was the second most profitable company in the USA, HR departments were helping employees remain eligible for public assistance of foods stamps and Medicare by cutting hours to keep wages at levels to below maximum levels. Taxpayers were subsidizing wages through earned income credits, food stamps and Medicaid. Had Walmart raised wages by $100 per week, per employee, it still would have been one of the most profitable companies in America, but not the second most profitable company in America. And all of their employees would make enough money that they wouldn't need food stamps or earned income credits.

 

[g5000]

After the 2008 crash and QE was begun, Fed Chairman Ben Bernanke said he wished he could drop money out of a helicopter directly into the hands of the American people, thus earning the nickname "Helicopter Ben".

QE was giving money to the banks instead of the people. And the banks buried the money in their back yards instead of lending it out. So we had no inflation.

Well, the federal government finally launched the helicopter last year and gave everyone stimulus money directly. And America went on a spending spree. So now we have inflation.

I think what the Fed is waiting for is for us to run out of that money and for spending to slow down.

If that happens, and it probably will, inflation will come down commensurately.

That's what the Fed is waiting and hoping for.

 

[Mac-7]

I wasn't sure about putting this in the political section but it does all come back to this. For over 12 years we have had economic policies that piled trillions of dollars into the markets. Now with talk of pulling back on that, the record increases are addictive and must be supported it would seem.

This article (not from a highly biased site) is noting that much of the increase in prices is simply business chasing yearly record profits.

Fattest Profits Since 1950 Debunk Inflation Story Spun by CEOs

I think you did not read the entire article

This for instance:

“ The most important reason why both companies and workers are earning more than they did in February 2020, even though the economy’s been through a record-busting recession since then, is America’s Covid-era fiscal policy. Ample support for households meant their incomes actually rose, an unprecedented outcome in a slump, so they bought more stuff from businesses too.”

Biden (and trump to a lesser extent) has dumped unearned dollars into the economy and created an artificial demand that cannot be sustained

 

[g5000]

All right, let's talk about profits. I did this a while back when oil hit the highest its ever been, back in 2008.

Let's say your company operates on a 10 percent margin. Your costs for labor, raw materials, etc. cost, say, 100 dollars. You then sell the final product for 110 dollars. You make a 10 percent profit, reaping 10 dollars.

Now let's say the cost of raw materials goes up due to inflation, and now your total expenses are 120 dollars. So now you sell your final product for 132 dollars.

You've still made a 10 percent margin, only now your profit is 12 dollars.

You report to your stockholders you have achieved a 20 percent increase in profits this year.

That is what is going on.

 

[Harpy Eagle]

Biden (and trump to a lesser extent) has dumped unearned dollars into the economy and created an artificial demand that cannot be sustained

Pretty sure Trump gave out more unearned dollars into the economy than did Biden. But I could be wrong

 

[g5000]

Pretty sure Trump gave out more unearned dollars into the economy than did Biden. But I could be wrong

Trump added $8 trillion to the federal debt. He also wanted the stimulus to be even more than what the Democrats asked for. He wanted $2000 instead of $1200 for the last stimulus payment.

Biden will probably exceed Trump's debt, though. He just needs more time.

 

[Harpy Eagle]

Biden will probably exceed Trump's debt, though. He just needs more time.

Without a doubt. Biden wants to spend us into oblivion.

 

[bendog]

After the 2008 crash and QE was begun, Fed Chairman Ben Bernanke said he wished he could drop money out of a helicopter directly into the hands of the American people, thus earning the nickname "Helicopter Ben".

QE was giving money to the banks instead of the people. And the banks buried the money in their back yards instead of lending it out. So we had no inflation.

Well, the federal government finally launched the helicopter last year and gave everyone stimulus money directly. And America went on a spending spree. So now we have inflation.

I think what the Fed is waiting for is for us to run out of that money and for spending to slow down.

If that happens, and it probably will, inflation will come down commensurately.

That's what the Fed is waiting and hoping for.

Bingo. And that's why I think it's bs for politicians and economists to say Biden's BBB is non-inflationary because it's costs are "paid for" with higher taxes. If the taxes are on money that's "being buried in backyards" or put in bonds or equities and instead goes to consumers who demand more consumer goods .... that's inflationary unless there is an equal increase in goods.

Of course simply goosing equity and bond markets predominantly benefits the very wealthy, but if you have an IRA or pension type vehicle, it's not bad either. Esp if you have an underfunded plan.

ANd we still have Trump's tariffs (taxes) on imports. And farmers are having trouble getting their goods to market.

 

[g5000]

Without a doubt. Biden wants to spend us into oblivion.

Massive overspending is bipartisan.

 

[bripat9643]

Massive overspending is bipartisan.

Wrong. It's almost entirely a Dim thing. This so-called "infrastructure" bill is a perfect example, and BBB is an even better example.

 

[Harpy Eagle]

Wrong. It's almost entirely a Dim thing. This so-called "infrastructure" bill is a perfect example, and BBB is an even better example.

where the **** were you the past 4 years when Trump was asking for more spending than any POTUS in history?