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42
US disinflation and the COVID-19 supply shock (www.brookings.edu)
submitted 5 months ago by fukhueson to c/news
25 comments fedilink hide all child comments
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[–] TheDemonBuer 21 points 5 months ago* (last edited 5 months ago) (1 children)

Bare shelves during the COVID-19 pandemic may have made inventory managers more conservative. That more conservative approach to inventories, in turn, could have generated a wider gap between output prices (where higher prices diminish end demand and therefore boost inventories) and input prices...Output prices rose significantly more than input prices, i.e., firms hiked margins, potentially as a mechanism to better conserve inventory...(Note that this potential driver of COVID-era margin expansion is distinct from and potentially more plausible than “greedflation.”)

Maybe it started out as inventory managers trying to conserve inventory due to uncertainty, but if you look at the charts, output prices spiked even after input prices had come down significantly, and after supply chains had normalized considerably. I think once the businesses saw that people were still buying at the higher prices, and the record profits they were making, they couldn't turn down the opportunity. It was probably a combination of inventory management and greedflation. There's no reason why it has to be only one or the other.

[–] fukhueson 5 points 5 months ago* (last edited 5 months ago) (1 children)

It was probably a combination of inventory management and greedflation. There's no reason why it has to be only one or the other.

https://www.reuters.com/markets/us/corporate-greed-not-blame-price-pressures-fed-study-shows-2024-05-13/

Corporate price gouging has not been a primary driver of U.S. inflation, according to research published on Monday by economists at the Federal Reserve Bank of San Francisco.

While markups for motor vehicles and petroleum products did rise sharply during the 2021-2022 inflation surge, markups across the entire spectrum of U.S. goods and services have been relatively flat during the post-pandemic recovery, the bank's latest Economic Letter showed.

"As such, rising markups have not been a main driver of the recent surge and subsequent decline in inflation during the current recovery," wrote the bank's research chief Sylvain Leduc and colleagues Huiyu Li and Zheng Liu.

[–] TheDemonBuer 7 points 5 months ago (1 children)

That's a different article. In the original article you posted, the included charts (charts 5 and 6) clearly show a spike in output prices, even after input prices had come down significantly, as I said.

[–] fukhueson 3 points 5 months ago* (last edited 5 months ago) (2 children)

You're correct it is a different article. It is reporting on greedflation.

[–] [email protected] 1 points 5 months ago (1 children)

Can you post the link for that article please?

[–] TheDemonBuer 0 points 5 months ago* (last edited 5 months ago) (1 children)

Well, maybe the analysts at the Fed made their determination prematurely. Maybe it's a blind spot in their analysis. I don't think companies planned it, necessarily. I'm sure they were as surprised as anyone that consumers were paying the higher prices, but the businesses were, nonetheless, more than happy to reap the rewards. I don't think it's that unbelievable. That's why businesses exist, to make as much profit as possible. If consumers are willing to give them more money, they'll take it. I certainly don't expect them to turn down the extra profits.

[–] fukhueson 0 points 5 months ago (1 children)

Well, you're entitled to your opinions, I'll stick with the data.

[–] TheDemonBuer 2 points 5 months ago (1 children)

I'm not sure the data backs up what the Fed is claiming. Regardless, data doesn't necessarily tell the whole story, and if you look only at numbers, figures, and ratios, your analysis is likely insufficient.

[–] fukhueson 0 points 5 months ago (1 children)

I disagree entirely. I would counter that your unsourced personal opinion does not counter data.

[–] TheDemonBuer 1 points 5 months ago (2 children)

Well, let's assess. Do you agree that businesses and companies exist primarily to make as much profit as possible? If so, wouldn't you also agree that it therefore makes sense for companies to seek to maximize profits at every available opportunity?

[–] [email protected] 1 points 5 months ago

Price gouging is an illegal practice that should have been stopped by the state.

The state allowed it to happen despite the law.

The state is captured by the rent seekers.

Everything is working as intended?

Also a lot of price gouging happened with things like food and rent.

[–] fukhueson -1 points 5 months ago (1 children)

I think it's way more complicated than that, and that the article disagrees with your unsourced personal opinions. I had hoped you'd have some collection of well sourced articles backing up the simplistic assertion of "line goes up" meme that directly counters the specific data in the article, but unfortunately I see you do not have any reliable data to support your position, much less refute what is in the article. I don't see this going anywhere.

[–] TheDemonBuer 2 points 5 months ago

I think it's way more complicated than that

It is, but I wasn't claiming to be offering an all encompassing theory of the universe, I was offering a premise for my argument. Saying, "it's complicated" is not a refutation of my premise.

[–] xhieron 18 points 5 months ago (1 children)

Holy shit, actual analysis from a thinktank! And here I was so used to thinly veiled lobbying, propaganda pieces, and bribery that I had begun to think the American research institute was dead.

On the actual substance: if this is true, it should be good politically, but I suspect that recovery from the lingering economic trauma arising from inflation (real or imagined) will lag even further. People feel like prices are still rising too fast, whether they actually are or not, and the aforementioned propaganda engine doesn't help.

[–] Gradually_Adjusting 26 points 5 months ago* (last edited 5 months ago)

Usually what happens is that a Democrat works their ass off fixing the economy, the felt effects lag, and a Republican gets to grunt about how great "their economy" is.

[–] [email protected] 3 points 5 months ago (1 children)

Straight from the regime propaganda original source folks!!!

[–] fukhueson 2 points 5 months ago (1 children)

Hilarious :)

https://mediabiasfactcheck.com/brookings-institute/

Overall, we rate Brooking Institution Left-Center biased based on donations to primarily Democratic candidates and policy advocacy that slightly favors the left. We also rate them Very High for factual reporting due to strong sourcing and a clean fact check record. (D. Van Zandt 5/15/2016) Updated (12/22/2023)