Inflation explanation

[begreen]

Although it's popular to blame inflation on government programs, a piece in the Wall Street Journal notes that businesses are significantly boosting profit margins. They are confident that consumers will blame supply chain issues and higher energy prices instead of the actual source.
"According to economists at the ECB, businesses have been padding their profits. That, they said, was a bigger factor in fueling inflation during the second half of last year than rising wages were."
In other words, corporate greed is driving inflation and we are all paying the price.

Why Is Inflation So Sticky? It Could Be Corporate Profits

Some companies might have been raising prices faster than their costs have increased, making it harder for inflation to fall, economists say.

www.wsj.com

 

[xman23]

It's obvious prices are changing because inflation says you can, and nobody will notice it. As much as possible I try not to purchase stuff until competition gets this back under control.

 

[begreen]

The problem is, that when artificial inflation like this starts at the top, it snowballs. So when a major oil company like Shell decides to cash in on a profiteering bonanza, those costs get amplified, by everyone down the line, ie: shipping, middlemen, and final services. Each one tacks on an additional 5-10% to cover their asse(t)s. This is how a stove installation goes from $4-5K last year to $8K this year. Meanwhile, did paychecks go up 100%?

 

[stoveliker]

It's obvious prices are changing because inflation says you can, and nobody will notice it. As much as possible I try not to purchase stuff until competition gets this back under control.

That won't help you; inflation is the rate of increase in prices. If inflation is under control again, the prices will NOT be coming down, but will remain more constant (but still slowly increasing at around the goal of 2 percent). I.e. the things you need to buy will be more expensive and won't come back down. So, with inflation, it's better to buy now than buy later because later it's going to cost you more dollars.

This is all unless deflation will happen - but let's all hope that does not as it's far worse for the economy than inflation.

 

[Ashful]

It's obvious prices are changing because inflation says you can, and nobody will notice it. As much as possible I try not to purchase stuff until competition gets this back under control.

Only obvious, if you're not seeing the purchasing side of your business. I can't speak for others, but my prices are going up only because my costs are going up. The hourly rate driving mark-up hasn't changed.

I think people are too quick to blame greed, when they don't have any clue what's actually driving costs and pricing.

 

[begreen]

I think people are too quick to blame greed, when they don't have any clue what's actually driving costs and pricing.

That was the assumption until corporate reports started coming out. I know a local garden shop has added 5% on their end in anticipation of higher prices down the road. So has the shipper and their wholesalers.

 

[Ashful]

That was the assumption until corporate reports started coming out. I know a local garden shop has added 5% on their end in anticipation of higher prices down the road. So has the shipper and their wholesalers.

Yeah, I'm sure there's greed out there. But there are enormous differences between small businesses selling the services and products you use everyday, and the corporate behemoths setting pricing on your iPhones, televisions, and streaming services. I guess that while most small businesses are just trying to survive in this environment of fast-changing costs, those with the infrastructure to leverage this toward their advantage are doing just that.

Realistically, 5% could be under-shooting, if they're quoting for future orders. That's the trouble, when you're quoting 30-60 days out, and the market price on your goods is changing that quickly.

 

[begreen]

For sure. It is hard on local businesses. They are part of the community and have a close relationship with their customers. The article is pointing out that it's the major suppliers that have started this snowball rolling, not supply chain issues or govt. programs. This has become apparent in their corporate earnings reports.

 

[bogieb]

Although it's popular to blame inflation on government programs, a piece in the Wall Street Journal notes that businesses are significantly boosting profit margins. They are confident that consumers will blame supply chain issues and higher energy prices instead of the actual source.
"According to economists at the ECB, businesses have been padding their profits. That, they said, was a bigger factor in fueling inflation during the second half of last year than rising wages were."
In other words, corporate greed is driving inflation and we are all paying the price.

Why Is Inflation So Sticky? It Could Be Corporate Profits

Some companies might have been raising prices faster than their costs have increased, making it harder for inflation to fall, economists say.

www.wsj.com

Well, I couldn't read the article because it is behind a paywall, so I will take for granted that the OP's synopsis is correct.

Yeah, I'm sure there's greed out there. But there are enormous differences between small businesses selling the services and products you use everyday, and the corporate behemoths setting pricing on your iPhones, televisions, and streaming services. I guess that while most small businesses are just trying to survive in this environment of fast-changing costs, those with the infrastructure to leverage this toward their advantage are doing just that.

Realistically, 5% could be under-shooting, if they're quoting for future orders. That's the trouble, when you're quoting 30-60 days out, and the market price on your goods is changing that quickly.

And many things aren't available that quickly. For the place I work at, fairly common items (for building what we build - and items that a whole lot of other companies also use), that used to be a 14-30 day lead time are now 180-300 days out. We can't buy from the secondary market and they have to be from approved spec mfgs, so we have to take whatever price they quote.

Many company's had to eat cost increases during 202-2021 because of contracts while our suppliers gave us force majeures to get out of theirs (that is still happening). And yes, there are plenty of people that I know that got up to 75% pay increases by changing jobs in the tight market from receiving inspectors to engineers and managers (which also has massive additional costs to the hiring company). But you can't build your product without people there to do it (and lord forbid you go with automation because then everyone bitches about how they are cutting the human component ouit and being greedy).

So last year's contracts (which for a lot of companies is actually not the calendar year but March thru March or some other weird thing), had price increases to account for the fact that we had to dip into the coffers just to stay the course. And then there are governments that are threatening to, or have raised taxes on profits (and there are certain costs that cannot be written off anyway such as maintenance of equipment).

But yeah, let's blame the entire economy on the greedy businesses. I'm not saying that governmental policies are to blame for everything, nor am I saying there aren't companies taking advantage, I'm just saying that it is way too easy to blame just one sector and ignore the complexities of the whole situation.

 

[EbS-P]

With interest rates really low corporations were sitting on really large cash reserves with the downturn in 2020 they did little to no capital expenditures. So they bought back their stocks. I think the effect is this is difficult to quantify but I feel it has had a role in the inflation.

 

[stoveliker]

With interest rates really low corporations were sitting on really large cash reserves with the downturn in 2020 they did little to no capital expenditures. So they bought back their stocks. I think the effect is this is difficult to quantify but I feel it has had a role in the inflation.

If companies buy back stock, they are essentially pumping liquidity into the market. The latter generally increases inflation (hence the fed policy of restricting access to liquidity, by increasing interest rates).

 

[SpaceBus]

"Real" inflation cannot exist when there are record profits. The value of money has not changed, the businesses/corporations are profiteering. However I recognize that saying "inflation" is much easier.

 

[ABMax24]

When you increase the available money supply (as every western country did during COVID) and the quantity of goods available for purchase does not increase accordingly, the average price of goods increases by the increase in that ratio.

 

[begreen]

When you increase the available money supply (as every western country did during COVID) and the quantity of goods available for purchase does not increase accordingly, the average price of goods increases by the increase in that ratio.

That is part of the issue. Quantitative easing should have ended around 2018 but the administration heavily pressured the Fed for it to continue.

 

[StoveInNH]

Although it's popular to blame inflation on government programs, a piece in the Wall Street Journal notes that businesses are significantly boosting profit margins. They are confident that consumers will blame supply chain issues and higher energy prices instead of the actual source.
"According to economists at the ECB, businesses have been padding their profits. That, they said, was a bigger factor in fueling inflation during the second half of last year than rising wages were."
In other words, corporate greed is driving inflation and we are all paying the price.

Why Is Inflation So Sticky? It Could Be Corporate Profits

Some companies might have been raising prices faster than their costs have increased, making it harder for inflation to fall, economists say.

www.wsj.com

Man, even on a woodstove forum I have to see biased, political posts.

Yah, I know it's posted in an off-topic section, but those who click New Posts still have to see it.

You're not going to change anyone's mind. Let's talk about wood stoves.

 

[joop]

damn woodstoves have gotten expensive

 

[begreen]

The Inglenook​

This new forum section is for off-topic discussions and announcements. Like the Inglenook of old, we picture a small recess next to the fire where conversations can occur.

The posting is not political. It presents an article from the Wall Street Journal which has a conservative political bias, but it brings up some important points based on factual observations of corporate earnings reports. This is a follow-up to the thread a year ago about inflation.

 

[StoveInNH]

damn woodstoves have gotten expensive

Ha ha! Nice rebound.

 

[StoveInNH]

The Inglenook​

This new forum section is for off-topic discussions and announcements. Like the Inglenook of old, we picture a small recess next to the fire where conversations can occur.

The posting is not political. It presents an article from the Wall Street Journal which has a conservative political bias, but it brings up some important points based on factual observations of corporate earnings reports. This is a follow-up to the thread a year ago about inflation.

Your posting IS political, and immediately shows your bias.

Anyone can find articles showing an opposing point of you to yours. But no one will convince you, Bob, Becky, Tony, Cassandra, Jamal, Henry or me. It's pointless.

You're extremely knowledgeable about wood stoves. Let's concentrate there.

 

[begreen]

Your posting IS political, and immediately shows your bias.

Anyone can find articles showing an opposing point of you to yours. But no one will convince you, Bob, Becky, Tony, Cassandra, Jamal, Henry or me. It's pointless.

You're extremely knowledgeable about wood stoves. Let's concentrate there.

This forum covers a broad range of topics. Wood heating is the main focus, but it also covers gas heating, boilers, developing green technologies, gear, and DIY help. The woodstove industry in particular has seen record price increases this last season. It is a relevant topic.

 

[StoveInNH]

This forum covers a broad range of topics. Wood heating is the main focus, but it also covers gas heating, boilers, developing green technologies, gear, and DIY help.

It sure does. However none of those topics are about determining the cause of inflation.

 

[begreen]

Nor are discussions of cars, gardening, food preservation, health, music, the economy, taxes, hobbies, etc. That is the intent of the Inglenook. Loosen up a bit or just don't watch this forum.

 

[StoveInNH]

Nor are discussions of cars, gardening, food preservation, health, music, hobbies, etc. That is the intent of the Inglenook. Loosen up a bit or just don't watch this forum.

Clearly we won't see eye to eye. But a large group of folks on this forum know exactly what I'm talking about . . . they just won't say it, which is fine.

I guess I'll go "loosen up."

 

[begreen]

We probably don't disagree as much as thought. Sure there are multiple causes, non-stop quantitative easing by the Fed being among them. The WSJ article just provides a retrospective look at how large corporations were taking advantage of the situation and backs it with the facts coming out of earnings reports. Last year it was just speculation. The rest has already been discussed frequently.

Stock Up People !!!!

Taken from my oil supplier about 15 minutes ago Delivery Quantity(GAL) Price/GAL($) 25.0 - 49.9 $6.519 50.0 - 74.9 $5.959 75.0 - 99.9 $5.769 100.0 - 149.9 $5.619 150.0 - 199.9 $5.569 200.0 - 299.9 $5.519 300.0 - 399.9 $5.499 400.0 - 499.9 $5.479 500.0 - 899.9 $5.459...

www.hearth.com

Supply issues? Insanely high quotes

We've gotten bids for Lopi Evergreen insert with insulated liner from three local companies here in the lower Midwest. They are all *thousands* of dollars higher than what I've seen reported here and elsewhere even just months ago, and I'm trying to figure out why. There's nothing uniquely...

www.hearth.com

Lumber Prices

I didn't realize lumber prices had gone thru the roof until I looked at some plywood sheathing yesterday at the local HD. A sheet that had been $34 several months ago is now $56. Wow. I think I will put off my project for now, until prices come back down. This article below from Bloomberg...

www.hearth.com

 

[StoveInNH]

We probably don't disagree as much as thought. Sure there are multiple causes, non-stop quantitative easing by the Fed being among them. The WSJ article just provides a retrospective look at how large corporations were taking advantage of the situation and backs it with the facts coming out of earnings reports. Last year it was just speculation. The rest has already been discussed frequently.

I think we're miles apart, but that ok. . Just a thought, as you are a moderator, is there a possibility of creating a separate forum to discuss political items, and not have that forum show up in the New Posts?

Might be the best of both worlds. People that would like to discuss political issues have a place to do so. And the rest of us that just want to see new posts without political discussion can do so.

Just a thought . . .

Other than that I think we've probably run our course on this topic.