Latest Inflation Numbers and Discussion

[rothlev]

On a personal level this is the 2nd year in a row where my COLA-lite pension will not keep up inflation. The COLA is capped quite a bit below last year's and this year's inflation rate. Yes, I realize that's still better than no pension or a non-COLA'd pension. I estimate my pension has been reduced by about 8% in real terms over the last two years. I add this only to accentuate that inflation is a direct threat to our financial well being.

Thankfully, I never bought one of those fixed annuities that some of my peers bought when they retired. There was a big push to get teachers to use funds from an optional delayed compensation plan to do just that. Not so good, IMO.

Many teacher's pensions have a fixed COLA of 3%. don't know if that come out good or bad. Certainly, not good these 2 years. My Florida pension ended the COLA altogether for new people.

 

[Chuckanut]

State and local taxes where I live have gone up. Property taxes, car tabs, various fees are all up in the last two years. Next year we are looking at a carbon tax which will drive gasoline prices higher. Taxes, including the gasoline tax, rarely if ever go down.

 

[Popeye]

Raise the minimum tax on their foreign earnings which would reduce a corporation’s incentives to shift profits and jobs abroad



Big corporations can use their dominant market power to jack up prices by hiding under the cover of inflation. It excites them to the point of convulsions. Small businesses can’t set prices the way big companies can. They have to sort of swallow most those costs.


Sure it can but I prefer they make some sacrifices and take as good care of their consumers as they do for shareholders. The sooner these interest rate increases stop the less pain for the consumer.

So how much profit is too much profit? And is it profit, contribution margin, gross margin or something else that you measure? And is it a whole company’s bottom line that gets “centrally planned” or each individual product line?

At Megacorp we had several complimentary product lines with vastly different margins. A new unit of equipment would sometimes be considered a success if the project broke even. A repair for that equipment years down the road would earn a decent margin that would make many happy but which would not carry a manufacturing company as a whole. Then there were the spare parts which could earn a margin that’s maybe double what the repair would earn. So, would the price planning board decide my parts prices are too high and limit them by taxing? If they do then they need to provide price supports for my new equipment sales as well. That’s only fair, right? Otherwise the business fails and you run out of companies to make your widgets eventually.

Do we really want government to have this much power and control? I don’t because it’s clear to me that the inflation we are seeing is mostly a result of government policies around the world.

 

[Sunset]

On a personal level this is the 2nd year in a row where my COLA-lite pension will not keep up inflation. The COLA is capped quite a bit below last year's and this year's inflation rate. Yes, I realize that's still better than no pension or a non-COLA'd pension. I estimate my pension has been reduced by about 8% in real terms over the last two years. I add this only to accentuate that inflation is a direct threat to our financial well being.

Thankfully, I never bought one of those fixed annuities that some of my peers bought when they retired. There was a big push to get teachers to use funds from an optional delayed compensation plan to do just that. Not so good, IMO.

Same for DW , but worse, her tiny pension is non-cola, so it hurts. Wasn't so bad when inflation was ~1% or less.
Only thing worse is me, with no pension.
I have a rental in a rent controlled area, and they only allowed a 2.5% rent increase so renters can be shielded from the effects of inflation, but they "forgot" to shield the small landlords

 

[Montecfo]

Raise the minimum tax on their foreign earnings which would reduce a corporation’s incentives to shift profits and jobs abroad

The punishment type "incentives" cause businesses to leave.

Sure it can but I prefer they make some sacrifices and take as good care of their consumers as they do for shareholders. The sooner these interest rate increases stop the less pain for the consumer.

So why not go to shareholders' meetings and agitate for this? It is a competitive marketplace.

I agree with you that some companies are using the inflationary environment as "cover" to raise prices, but they don't do that in a vacuum. They have competitors who may use different pricing strategies to gain market share.

 

[Teacher Terry]

In year 3 of retirement our raises started at 2% and by year 15 are 5% yearly. People hired after 2010 are capped at 4% for life. I am very grateful for the raises.

 

[Beststash]

So how much profit is too much profit? And is it profit, contribution margin, gross margin or something else that you measure? And is it a whole company’s bottom line that gets “centrally planned” or each individual product line?

At Megacorp we had several complimentary product lines with vastly different margins. A new unit of equipment would sometimes be considered a success if the project broke even. A repair for that equipment years down the road would earn a decent margin that would make many happy but which would not carry a manufacturing company as a whole. Then there were the spare parts which could earn a margin that’s maybe double what the repair would earn. So, would the price planning board decide my parts prices are too high and limit them by taxing? If they do then they need to provide price supports for my new equipment sales as well. That’s only fair, right? Otherwise the business fails and you run out of companies to make your widgets eventually.

Do we really want government to have this much power and control? I don’t because it’s clear to me that the inflation we are seeing is mostly a result of government policies around the world.

Interesting post. I didn't intend to get into a discussion about sales/operations, cost/profit center, or embedded product base for a manufacturing or service business.

I was strictly talking about the fact that the corporate profits make up the lion's share of the inflation we are now seeing. The fact that corporate profits hit record highs in 2021 and also in 2022, and corporations increased prices at the fastest rates in decades. It is not normal and I hope is only a short term situation. The inflation we’re facing is a problem with deep roots and it is called "corporate greed" or as economists like to say "maximizing profits".

 

[Chuckanut]

I was strictly talking about the fact that the corporate profits make up the lion's share of the inflation we are now seeing.

And here I thought it was caused by massive deficit spending on the part of the Federal government that started in 2020 and has extended right up to today. You know, too much money chasing too few things.

By the way, the lion's share is everything. Many people think it means the biggest share. No, the fable is clear. The lion gets it all.

He then very carefully divided the Stag into four equal parts.
“I am King Lion,” he said, when he had finished, “so of course I get the first part. This next part falls to me because I am the strongest; and this is mine because I am the bravest.”
He now began to glare at the others very savagely. “If any of you have any claim to the part that is left,” he growled, stretching his claws menacingly, “now is the time to speak up.”

 

[Beststash]

And here I thought it was caused by massive deficit spending on the part of the Federal government that started in 2020 and has extended right up to today. You know, too much money chasing too few things.

By the way, the lion's share is everything.

I guess it all depends on who you believe.

 

[jurgs01]

Interesting post. I didn't intend to get into a discussion about sales/operations, cost/profit center, or embedded product base for a manufacturing or service business.



I was strictly talking about the fact that the corporate profits make up the lion's share of the inflation we are now seeing. The fact that corporate profits hit record highs in 2021 and also in 2022, and corporations increased prices at the fastest rates in decades. It is not normal and I hope is only a short term situation. The inflation we’re facing is a problem with deep roots and it is called "corporate greed" or as economists like to say "maximizing profits".[emoji23]

Source? Math?

 

[Running_Man]

Interesting post. I didn't intend to get into a discussion about sales/operations, cost/profit center, or embedded product base for a manufacturing or service business.

I was strictly talking about the fact that the corporate profits make up the lion's share of the inflation we are now seeing. The fact that corporate profits hit record highs in 2021 and also in 2022, and corporations increased prices at the fastest rates in decades. It is not normal and I hope is only a short term situation. The inflation we’re facing is a problem with deep roots and it is called "corporate greed" or as economists like to say "maximizing profits".

This is demonstably untrue. Profit Margins have fallen for 5 straight quarters. The biggest increase to corporate profits was the government giving money out during 2020 to corporations, individuals and local governments which led to this inflation that is real, not some mythical corporate profits.

https://www.wsj.com/livecoverage/stock-market-news-today-2022-10-21/card/s-p-500-net-profit-margins-on-pace-to-dip-in-q3-for-fifth-straight-quarter-XtZnWmbr4IScnUK84A8w

 

[Running_Man]

And Earnings growth is shrinking as inflation and interest increasing greatly affects profits.

 

[NW-Bound]

High inflation hurts businesses. We can just look at the past to know. Poor profits, poor growth prospects. And that's why the stock market did not do well in these periods. Misery galore.

Some people may see oil companies making big bucks and think other businesses also do. But Exxon Mobil lost $22.4 billion in 2020 when COVID broke out, and nobody cried for them. BP lost $20.3 billion. Shell lost $21.7B. Numerous other smaller energy companies all lost mucho money.

I am no advocate of oil companies, but we still need oil, and these companies have to make money in order to continue their operation.

 

[MichaelB]

People complain about petroleum company profits but US tech companies make far more, followed by banks. This article by Yahoo finance shows only 1 petroleum company in the top 10 for last year https://www.yahoo.com/video/apple-most-profitable-company-fortune-180540279.html#:~:text=Tech

The profits of Apple, Google and Microsoft probably exceed the entire petroleum industry, and definitely had a far lower tax rate.

 

[Beststash]

We can argue until the cows come home about the cause of inflation but we can't lose sight of the basic point that it is outrageous that corporations are seeing huge profits while purchasing power for so many American households is declining.

I used to believe the corporate BS also but after almost 20 years of retirement and witnessing the golden parachutes of so many executives and layoffs of the underlings I no longer believe it.

Luckily I exited with a good pension (which are few and far between these days - more corporate greed) and finally got my dignity back but it took a while. I layed off so many people in the Y2K fiasco and saw personally the unethical behavior that I no longer believe any of their BS.

Peace ☮

 

[Montecfo]

We can argue until the cows come home about the cause of inflation but we can't lose sight of the basic point that it is outrageous that corporations are seeing huge profits while purchasing power for so many American households is declining.



I used to believe the corporate BS also but after almost 20 years of retirement and witnessing the golden parachutes of so many executives and layoffs of the underlings I no longer believe it.



Luckily I exited with a good pension (which are few and far between these days - more corporate greed) and finally got my dignity back but it took a while. I layed off so many people in the Y2K fiasco and saw personally the unethical behavior that I no longer believe any of their BS.



Peace [emoji1280]

Hogwash.

Without profits none of us would be retired. Demonizing corporations for making profits misses that point.

Businesses have no obligation to lower prices because you have decided their profits are excessive. Instead their charter is to serve customers and investors. US employees have enjoyed much higher wages historically than the rest of the world. But markets for products are often worldwide, meaning US companies have had to reduce costs, innovate or both in order to stay competitive, even to stay in business. No news flash here but you are fortunate that your company did not go bankrupt, freeze that pension, etc. Plenty of folks who have no reason to post on this board cannot say that.

It is corporate profits that made your pension possible. Surely you realize that.

 

[jldavid47]

It's clear to me. Companies aren't being forced to raise prices because of inflation. They're raising prices because they can.

Right. Their costs have not gone up at all. Sure, Sparky. What world do you live in? Corporations are not immune to supply cost increases. Your beliefs are not reality and the sooner you realize that the better off you will be.

 

[jurgs01]

We can argue until the cows come home about the cause of inflation but we can't lose sight of the basic point that it is outrageous that corporations are seeing huge profits while purchasing power for so many American households is declining.



I used to believe the corporate BS also but after almost 20 years of retirement and witnessing the golden parachutes of so many executives and layoffs of the underlings I no longer believe it.



Luckily I exited with a good pension (which are few and far between these days - more corporate greed) and finally got my dignity back but it took a while. I layed off so many people in the Y2K fiasco and saw personally the unethical behavior that I no longer believe any of their BS.



Peace [emoji1280]

Someone literally posted the numbers showing what you are saying isn't correct. It is not about "believing" anything.

The most unethical thing about corporations is using government for unfair market advantage over smaller competitors.

 

[Beststash]

This seems to tell a different story?

 

[Graybeard]

The Economic Policy Institute is a 501 non-profit American, left-leaning (my emphasis) think tank based in Washington, D.C., that carries out economic research and analyzes the economic impact of policies and proposals. Wikipedia

Nuff said.

 

[Beststash]

If I'm beating a dead horse just let me know, I certainly do not want to offend anyone.

The underlying economic problem is profit-price inflation. It’s caused by corporations raising their prices above their increasing costs.

Corporations are using those increasing costs – of materials, components and labor – as excuses to increase their prices even higher, resulting in bigger profits. This is why corporate profits are close to levels not seen in over half a century.

Corporations have the power to raise prices without losing customers because they face so little competition. Since the 1980s, two-thirds of all American industries have become more concentrated.

Why are grocery prices through the roof? Because just four companies control 85% of meat and poultry processing. Just one corporation sets the price for most of the nation’s seed corn. And two giant firms dominate consumer staples.

All are raising prices and increasing profits because they can.

Big pharma, comprising five giants, is causing drug prices to soar.

The airline industry has gone from 12 carriers in 1980 to just four today, all rapidly raising ticket prices.

Wall Street has consolidated into five giant banks, raking in record profits on the spreads between the interest they pay on deposits and what they charge on loans.

Broadband is dominated by three giant cable companies, all raising their prices.

Automobile dealers are enjoying record profits as they raise the retail prices of automobiles.

Gas prices have started to drop but big oil still has the power to raise prices at the pump far higher than the costs of crude.

https://www.theguardian.com/commentisfree/2022/sep/25/inflation-price-controls-robert-reich

 

[Popeye]

The Economic Policy Institute is a 501 non-profit American, left-leaning (my emphasis) think tank based in Washington, D.C., that carries out economic research and analyzes the economic impact of policies and proposals. Wikipedia

Nuff said.

Plus they are comparing a 40 year average to a six quarter figure. Cherry picking much?

 

[Popeye]

When something bad starts happening and I wonder about the cause, I look for what has changed. We always had the (I’ll use your phrase) corporate greed and the consolidations have been ongoing for decades. The thing that has taken a quantum leap is the drunken sailor government spending. Lots of folks were saying this would cause inflation and now we have it.

Why do companies need an excuse to raise prices? They are free to do so. They don’t need to have a justification. If Apple can sell an iPhone for $1400 at volumes they like, that’s what they should charge.

It’s almost comical on the gas price issue. Every time prices go higher we get some politico telling us it’s the evil oil companies, price gouging, and monopoly. Then they promise an investigation and a crackdown. They have hearings and discover…nothing. I’m not sure if it is new folks getting familiar with the real situations or if it was a dog and pony show all along.

 

[Running_Man]

This seems to tell a different story?

You are comparing 2020 to 2021 see my chart above that clearly shows what you are posting, also profits are quickly eroding as inflation from the massive injection of money in the economy works through the system.

 

[Beststash]

You are comparing 2020 to 2021 see my chart above that clearly shows what you are posting, also profits are quickly eroding as inflation from the massive injection of money in the economy works through the system.

Isn't that a earnings chart?? We're talking profits. A company may have an impressive amount of earnings but have very little profit.