Did corporate greed fuel inflation? It's not biggest culprit

Just an observation. I NY 89 octane is green. In CA green is diesel. What a surprise that would be for someone.

Think about that. US non-financial corporations are sitting on more cash than the GDPs of all but the four largest economies. These are monopoly rents and would not be possible in a more competitive economy. This trend is highly deflationary but world events have created shortages and disruptions leading to a short term spike in prices. That will not last because the deflationary forces are overall greater and more durable. The disruptions will be overcome but the lack of competition is barely even recognized much less addressed in law making.

Also the increase in money supply due to QE was used by the banks to shore up their balance sheets which were in a bad shape instead of making investments and giving loans. The money multiplier effect was nullified.

No. The money is sitting in the unspent balances of major corporations. US non-financial corporations are sitting on about $4 Trillion, yes trillion, in unspent cash balances. That money should be circulating in the economy generating incomes and GDP but instead is sitting in corporate coffers.

In addition US states are still sitting on hundreds of billions of unspent Covid-19 stimulus funds.

Even with QE from multiple central banks, the highly concentrated nature of major consumer markets assured that money didn't stay in circulation long but was soaked up from consumers in the form of monopoly rents.

All right, so that means that there was not much increase in money supply inspite of relentless QE. Also the increase in money supply due to QE was used by the banks to shore up their balance sheets which were in a bad shape instead of making investments and giving loans. The money multiplier effect was nullified.

That helps to explain why there was not much inflation inspite of relentless QE. It in no way invalidates the QTM which is widely accepted by most economists except Keynesians.

People are still stuck in 60+ year-old theories that have no relevance to economies of today.

LOL the QTM is 500 years old and has stood the test of time. The only critics are Keynesians, and their criticism is more related to the fact that since prices are sticky in the short run, the inflation might not be apparent immediately after increases in money supply.

Folks here are observing the real world and making up their own economic theories, whereas first they should study the widely accepted economic theories and then understand why it does or does not explain what is happening in the real world.

People are still stuck in 60+ year-old theories that have no relevance to economies of today.

The theories themselves remain relevant and explanatory. The problem is the extremely low economic literacy of the general public. Most of the public and most politicians too do not understand where their nation is in terms of economic theory.

JeffLeeJune 27  10:49 am

Japan was the first to do ultra loose policy from 2001 -- and ended up with deflation as a result. The other western countries started doing it later and got inflation under 2%. 

So "printing money" is clearly not inflationary. The main factors are the twin global supply shocks of Covid/China and Ukraine. Even a kid can realize that.

Agree. People are still stuck in 60+ year-old theories that have no relevance to economies of today.

I said it’s always inflationary. 

But it isn't always. Until recently the broad economic trends have all be deflationary. Even with QE from multiple central banks, the highly concentrated nature of major consumer markets assured that money didn't stay in circulation long but was soaked up from consumers in the form of monopoly rents. That has been going on since about 2009. What did change in the past months were the combination of buyers returning to the market and the workplace (at least in the US) as the pandemic eased followed almost immediately thereafter by the economics shocks caused by the war in Ukraine and western sanctions on Russia.

In any event all you are trying to do now is weasel out of being called out for what is not true.

@JL

I said it’s always inflationary. I didn’t say that it will always lead to inflation. There is a big difference.

Please read up on the basics of quantity theory of money.

https://www.investopedia.com/ask/answers/042015/how-does-money-supply-affect-inflation.asp

@Evil

 "...there were other factors..." 

Maybe, but you said "always."

"Incessant increase in money supply without a corresponding increase in economic output is always inflationary.

"Always" except for Japan, which bucked that trend consistently for, um, over 20 years. LOL.

@Antique

 all I got was a lot of down votes but not a single reply addressing the points I made.

That's the story of my life on this forum.

Incessant increase in money supply without a corresponding increase in economic output is always inflationary.

But is a decrease in output without a change in demand not always inflationary irrespective of money supply? And is that not what we've been seeing over recent months? (Sorry. This economics stuff does my head in. Cause and effect seem to be whatever we want them to be.)

EvilBuddha

Today 04:04 pm JST

Funny all I got was a lot of down votes but not a single reply addressing the points I made.

Simple.

If printing money and covid were the problem then why did inflation just suddenly go from zero to sixty between Feburary and March the exact moment Russia invaded and the west set up sanctions oil boycott and our friends in Saudi Arabia raised oil prices.

The argument it it printing money just doesn't work.

The world inflation index was 6% in January 9.5% in March and even the major financial reports and publications called it "a sudden and rapid rise"

The ultra lose policy and money printing has be in place for years but only in February 2022 did it suddenly cause inflation to jump!

It is like saying,

There is a bridge neary house over a creek, everyday 100 bicycles cross the it go 10 years, suddenly last week is collapsed after an 18 wheeler crossed it, but it was the bicycles that are responsible because too many cross everyday.

@JeffLee

Just because something is inflationary does not mean it will always lead to inflation. In the countries you mentioned there were other factors due to which inflation was delayed.

JPY is a safe haven currency and Japan is an export powerhouse so Japan can keep on printing Yen and it will not lead to higher consumer prices immediately. USD is the worlds reserve currency so Feds can keep on printing USD and as long as trade is not disrupted the world will keep on demanding USD.

Incessant increase in money supply without a corresponding increase in economic output is always inflationary.

This is Macroeconomics 101. No politics here.

As Wakarimasen rightly said, increase in money supply is always inflationary.

And yet it doesn't, as proven by the real-world data I posted. But if "Wakarimasen" said so, then it must be true. LOL

But keep saying it is money printing if your politics tells you to.

It's scary how the public will believe a false narrative in the face of facts, judging by the up votes those arguments are garnering on this board. Doesnt make me hopeful for the human race.

Again if money printing was the problem, then why didn't it cause any problems untill February 2022 not January but all of a sudden March everything goes crazy.

What changed, did the suddenly print ten times more money?

No Russia Ukraine and oil prices shot up.

But keep saying it is money printing if your politics tells you to.

Japan was the first to do ultra loose policy from 2001 -- and ended up with deflation as a result. The other western countries started doing it later and got inflation under 2%.

Japan is an export powerhouse so there is a great demand for JPY among its trading partners. USD is the worlds reserve currency so the Feds can keep printing and as long as world trade is not disrupted and is growing, other countries will keep demanding USD.

These are artificial factors which kept inflation low in these countries.

As Wakarimasen rightly said, increase in money supply is always inflationary. There are other factors (like low consumer demand) which can give the appearance of inflation being kept in check, but now the chickens are coming home to roost.

@Wakarimasen

"Increase in money supply will always lead to inflation."

Except that it doesn't. Ditch the politically motivated narrative and check out the empirical data instead:

"Rapid Money Supply Growth Does Not Cause Inflation"

https://privatedebtproject.org/pdp/view-articles.php?Rapid-Money-Supply-Growth-Does-Not-Cause-Inflation-28

Here is something you can all do and pick your own country and or sources.

Look up inflation rate for January 2022 then do the same for March.

In some countries it went from negative to 5, 6, 7, even 9% in one month.

So it is clear the " money printing" hypotheses doesn't apply as that has been going on for decades and nothing changed on that front in February.

So now the Covid hypotheses, well again consumer demand was going just fine for several months, what changed in February, did consumers suddenly all rush out and increase buy stuff? No.

The Russia/Ukraine conflict started but regional wars rarely cause worldwide consequences, Yemen has been going for several years no inflation, Afghanistan, Iraq, Syria, still nothing from those war/conflicts.

So what really happened in February?

Sanctions, oil boycott, supply chain and oil supply cut and Saudi and friends increasing oil prices.

And the next month ( March) inflation started to skyrocket.

Any other attempt at an explanation is just trying to divert attention from the fact the Sanctions on Russia, Iran, Syria are all increasing oil prices and causing inflation.

Don't need to be an economist to see it.

Fact one one rise in wages for 2 decades fact two profit margins widened during the same to decade through workers productivity. Fact three Companies and bosses lie to workers. Unionise, collective bargin for 25% pay rise and 10% superannuation plan paid by the boss/ companies. Strike until conditions are met. Don’t listen to the elites and their enablers. They are protecting their mega bonuses and profit.

As for gouging, oil companies(say) lost tons of money over the previous decade - now they have a chance to make some money and reinvest it in development and exploration, governments immediately want to punish them. Dumb, dumb, dumb.+

I have to ask, do you work for the oil industry?

Seriously.

I took a look at oil company profits over the past 3 decades their nets profits are higher than nearly every other industry with the exception of some pharmaceutical companies.

I couldn't even find a year where the oil industry didn't make the top 10 in net profits.

Saying they "lost" money would be like my business making $ 50 million net this year compared to $60 million net last year and claiming I lost money. (Fully hypothetical my business was net negative for 2 years now)

In the above scenario I didn't lose anything, I just made less net profit.

Why anyone would listen to the oil industry's fake whining is beyond comprehension.

JL

Increase in money supply will always lead to inflation. Either asset price inflation (which we had for over a decade) or, like now, consumer price rises. Japan had some counter inflationary pressures (population decline, offshoring, huge debt overhang after the bust) that helped mitigate some of those effects. but now they have arrived with a vengeance.

As for gouging, oil companies(say) lost tons of money over the previous decade - now they have a chance to make some money and reinvest it in development and exploration, governments immediately want to punish them. Dumb, dumb, dumb.+

If you keep on printing money to keep interest rates low then even a kid can realise that inflation will be the consequence.

Japan was the first to do ultra loose policy from 2001 -- and ended up with deflation as a result. The other western countries started doing it later and got inflation under 2%.

So "printing money" is clearly not inflationary. The main factors are the twin global supply shocks of Covid/China and Ukraine. Even a kid can realize that.

If you keep on printing money to keep interest rates low then even a kid can realise that inflation will be the consequence.

The Quantitative Easing (a fancy term for printing money like there’s no tomorrow) that the Fed indulged in after the financial crisis meant that global investors sought out new markets for higher interest rates.

The silver lining for the US is that since the Fed has been forced to raise interest rates a lot of investment is now coming back to the US. As shown by the USD which is appreciating like anything.

Wow soo much left out or deliberately skipped over.

The sudden increase in demand for goods and services after nearly 2 years of "lockdown/movement restrictions" in most countries is the first reason.

But it would have all been Ok, we know this for a fact because everything was going fine until Russia and Ukraine and the second all the Sanctions started everything went downhill!

Our so-called Friends Saudi Arabia now at war and supplied by the USA UK and Germany decided to raise oil prices at the same time as the west announced the boycott of Russian oil how nice of them.

But no protest no cutting of arms because the USA also has sanctions on Iran, Syrian oil so SA can raise prices as it pleases.

That one thing (high oil prices) is the cause of it all.

Oil high, = transportation high = high food prices, high goods higher service charges, higher everything.

Oh and to add to it Russia is also in the top 6 countries with flagged oil tankers, (if you don't understand, a large number of oil tanker are registered in Russia) these are also under embargo under the Sanctions so again higher cost for fighting over the remaining shipping as countries try finding alternatives shipping.

Peter NeilToday  08:47 am JST

Yeah, right. And inflation in all other countries across the world is a result of US government handouts in the US and the FED? Ridiculous American-centric view.

mug wasn’t just the US. It included the EU, UK and many other countries. You can’t keep printing without something happening sooner or later.

>

Blaming worker shortage? Omg I mean how many people died from the pandemic then. And surely they all need a job. They aren’t all sitting on unemployment.

supply shortage?

well possibly but you had two years to sort that out and to be honest, everything was don’t online. So I do t see it. I didn’t see any shortages on anything…. Except toilet paper.

companies got money, for doing nothing. So I think they know all the customers have their cash sitting in accounts and want a part of that pie, so decided to Jack up some of the prices. Not to mention all that stimulus that trump et al did.

gasoline I can work with due to Putin’s war.

it might be a good time to get companies to realize this is probably the real price of stuff. Instead of getting China to produce everything, might be better to build economic ties with smaller friendlier countries.

Yeah, right. And inflation in all other countries across the world is a result of US government handouts in the US and the FED? Ridiculous American-centric view.

I keep reading about how much money the Biden government gave to people, but it sounds like it was more to corporate America than to the regular person. 

There are a couple of things to consider. In the US major consumer markets are dominated by either outright monopolies or by oligopolies. When either condition exists in a market, the monopolists or oligopolists are free to raise prices and reduce output a bit to maximize their profits well beyond what would be possible in a fully competitive market. Think I'm kidding? What companies dominate the soft drink aisle? Coke and Pepsi. Most of the off brands are actually owned by one of those two. Now, who dominates the potato chip aisle? Frito Lay, but oh look Pepsico owns Frito Lay. How about the beer aisle? Miller Coors and Anheiser Busch both own around 50 different beer brands so those to oligopolists own the beer aisle. And every aisle is so dominated.

Because they have market control and can raise prices above what would be possible in a fully competitive market (6 or more firms with roughly equal market share) the difference in the prices they can charge compared to what they can charge in a competitive market represents a wealth transfer from consumers to producers. That wealth transfer is how stimulus money tends to end up being taken out of the market and stashed in the bank accounts of large corporations and their highly paid senior executives.

If you look at money supply data you can see the brief spikes where there were stimulus programs then the trend line returns to what it was in the months before. The velocity of money, the measure of how often a unit of currency changes hands has been on a quarter century decline for the US Dollar. Why? We allow market concentration (more monopolies and oligopolies) and that wealth transfer tends to take money out of circulation and restrict economic activity. There are good reasons founded in sound economics to restrict mergers and acquisitions and to break up existing monopolies and oligopolies.

In either case, a progressive profit tax would be good to replace the traditional corporate income tax. This would be great for small businesses as well.

I keep reading about how much money the Biden government gave to people, but it sounds like it was more to corporate America than to the regular person. Then the media keeps going on about how US citizens went on a shopping spree, but I think in many cases people needed used the money just to get by.

As for energy, it is interesting that China and India are still buying from Russia, at a discount no less, so their energy needs are taken care of, but still we have record energy prices set by the Saudis, and backed by the large US energy producers!

They include: Supply disruptions at factories, ports and freight yards. Worker shortages. President Joe Biden’s enormous pandemic aid program. COVID 19-caused shutdowns in China. Russia’s invasion of Ukraine. And, not least, a Federal Reserve that kept interest rates ultra-low longer than experts say it should have. - Said Mr 'Azar', the economist.

LOL, an economist and he missed the part global corporates ditched their local supply chain in favour of China because of their greed in the first place. Worker shortages? LOL, babhahahwarhahah, for greed they fired workers, send jobs off to China, and now it's not greed?

Did corporate greed fuel inflation? 

Yes it did, and growing inequality as anyone can see.

Corporate apologia article 100 percent in effect.

I hope the writer got paid at least

but probably could have been written by GPT3.