Thread by @econliberties

Inflation panic is everywhere — and for good reason. All across the economy, people are being charged more than they should be for the things they want and need. And naturally, they want to know why.

2/ There’s a quick way to check if a story you’re hearing about inflation is credible: Does it account for corporate profit margins, and acknowledge they are at record highs?

This piece does a nice job of explaining the role of profit here: bloomberg.com/news/articles/…

3/ Other things to understand:

1️⃣ The economy is running very hot and corporations are hoarding whatever they can.
2️⃣ When their costs go up, they pass them on to customers. But when their costs go down, they pocket the difference. This is why shoppers are feeling pinched.

4/ Things aren’t supposed to work this way. An economics textbook will tell you that a business that hoards savings will get undercut by a competitor who passes them on.

Why isn’t that happening today? Because there’s hardly any competition at all.

5/ With the blessing of misguided policymakers, corporate executives have spent decades stripping meaningful competitive pressure out of their industries.

6/ Eight shipping companies move 80 percent of the world’s cargo. Four meatpackers process 80 percent of U.S. beef. Almost all rental cars come from three corporations. The list goes on and on and on.

7/ When an industry has healthy competition, firms have to plan for rainy days. Without it, there’s little if any incentive to invest in being reliable.

Corporate executives look instead to maximize shareholder returns, catering to Wall Street instead of customers.

8/ When something small goes wrong inside one company, we might not notice. But when something big goes wrong everywhere — like a global pandemic — these brittle systems start to snap, and everything goes haywire.

9/ Everything, that is, except for the dominant corporations’ ability to turn a profit. Because they’ve got things rigged in their favor. By eliminating competition and becoming too big to challenge, they create a heads-I-win, tails-you-lose scenario for all of us.

10/10 And that’s what we’re seeing today: Corporations are reporting comically large one-year spikes in profits and profit margins even as they provide worse and worse service. They are thriving, and you are paying for it.