It's the economy stupid

Politics & Elections
121

Well, I suppose that usually it’s easier since usually the economy is worse and inflation isn’t a worry, so you can freely dump some raw cash into the system. Right now the economy changing and people don’t like change, but it’s not really bad. There’s high employment and relatively high wages. The one thing that you can’t do is enact something that would increase inflation.

There’s no practical way to make prices go back down so probably he needs to find a way to raise wages more quickly, all together, in battleground states.

Maybe that’s why he’s busy backing labor unions. But, probably there’s a better technique than that. I’ll have to think on it.

122

The Kansas City Fed estimates 60% of recent inflation is solely due to profit margin increases.

123

A business is a legal fiction. It can have profit so massive that it comes exploding out of its ears and it won’t be any happier than to just have enough for a warm belly. And in no case does it eat up those profits and take them away from everyone else.

A high profit level could be passed through to the stock holders as dividends (e.g. profiting the owners). The dividend rates of the S&P 500, however, are generally down over the last four years:

It could be passed out as bonuses to the employees (I’m not sure of a good way to check that except to rule out all other options for the profits).

Alternately, it could be used to grow the company - e.g. building new factories and hiring more workers. As it is, we do see an extremely low unemployment rate and I’ve been told that finding construction workers is very difficult at the moment.

I’m not thinking of a fourth option.

Corporate profit, at the moment, is serving the good of the average worker as best I can tell.

124

It doesn’t help that so much of the media right now is telling us that everything is awful, so folks get to wondering if they should be more worried about what’s just over the horizon.

125

I’ll help here.
Option number 4 on this particular list: Giant pay raise for the corporate side. Only.

126

In May of 2020? Yes, the economy was well below par in May of 2020 by pretty much any metric.

How do you not remember Covid?

127

You are correct. I don’t know what I was thinking when I posted that back in August.

The U.S. unemployment rate was 13.2 percent in May 2020.

128

Stock buybacks seem to be a popular option as well.

My point is that if wages go up across the board at a company by, say 10%, I would expect the price of the goods they sell to go up by no more than 10% and possibly less, since labor is only part of the cost of a good. So, if prices go up by more than the amount they raised wages by, then it’s profit-taking by the companies that is causing prices to go up.

129

It isn’t that simple. For example, in inflationary times businesses price goods not in relation to the price they paid for them, but the price it will take to replace them. So until they do replace them it will look like profits have gone up.

Also, when businesses anticipate hard times ahead, they cut spending now, or at least stop hiring and investing as much. They want a cash warchest to survive the upcoming recession. So it looks like their profits are going up, but what’s really going on is a shift between capital and investment, just as I chose not to buy a new car right now, even though mine is ten years old, because I’d rather have a bigger cash cushion for the next while. It doesn’t mean I’m wealthier.

Some of this is also the result of Biden’s stimulus, which is driving up demand for a lot of scarce goods and services, which drives up prices and immediate profits for sellers. We were told this is a good thing.

Some of this is ‘buy American’ plus sanctions all over the world. Protectionism reduces competition, which causes price increases for domestic goods that benefit. But that’s the whole point of protectionism.

And yes, some of it is increased profits in some industries due to sectoral shifts in the economy. When you knock things out of equilibrium, you create new winners and losers. Covid caused a lot of tech winners, and absolutely destroyed commercial real estate. We have yet to see the bill from that. The Ukraine war has driven up profits in military contractors and their suppliers.

And a lot of the gains are concentrated in a few very large, very high flying stocks. In fact, about half the all the gains of the S&P 500 in the 5 years before 2023
are the result of Apple, Microsoft, Google, Nvidia, Amazon, Meta Tesla, Netflix and Alphabet (Google).

130

I am not an economist, but my opinion is that the 2022 inflation was a consequence of supply chain disruption caused by the covid pandemic. Supply goes down, prices go up. This has affected every nation on the planet with the US faring better than most. Now things are settling down and inflation has eased. All this would have happened regardless of who was in the White House. The classical theories of the cause of inflation I believe take a back seat to the monumental crisis that was covid.

That being said, the American public for some reason thinks that presidents control inflation. It’s as if there is a button on the Resolute Desk labeled “Keep Inflation Down” that Biden simply failed to press each day. So groceries went up last year as did most other things. People are mad and they tell pollsters that they plan to take it out on Biden.

Except that they won’t. People haven’t voted for economic reasons for decades. It’s all tribalism. The red tribe is going to nominate a guy who wants to end democracy and become a fascist dictator but “the economy” is the fig leaf that they use to justify it. I am quite thankful to Dobbs and Jack Smith for giving Democrats and democracy a chance in 2024.

131

But they get it from their churches and Facebook friends.

132

Initial jobless claims surprised on the downside today and are down from last month, as did continuing claims, also down from last month. Consumer sentiment surprised slightly on the upside and is up from last month.

More people are expected to travel for Thanksgiving tomorrow than have done so in the last 20 years.

The jobless claims point to a strong economy, and consumer sentiment supports at least some rising feeling about personal economy. Thanksgiving travel also points to people feeling good about their own situation, whether or not they think the economy is good.

It’s mysterious.

133

But but but!

Their sources (biased tv stations, social media posts, friends repeating shit) tell them the economy is terrible! Turkeys cost $300! Gas is $5/gallon!!! Never mind that they themselves did not pay nearly this much… They won’t even believe themselves.

Must.
Blame.
Biden.

134

I swear to God, there will be families that travel for Thanksgiving, pay $3.00/gallon for gas, sit down to a $28 turkey and repeat the lies they have heard about the above costs like they were gospel truth.

135

I just paid more than $5 a gallon for gas - and not premium, either. Why, yes, I do live in the San Francisco area - what gave it away?

And around here, it’s not Must. Blame. Biden. It’s:
Must.
Blame.
Newsom.

136

Yeah, I’m in SoCal, and I thought “Wow! Cheap gas!”

137

Any significant profit for a large company is going to be much larger than you would reasonably give to the CEO (and there’s no reason to raise his wage unless you expect the high profit margin to continue - which is generally going to be unlikely, due to market forces). Giving him a few extra $100k a year or even an extra $1m a year isn’t going to scratch a significant profit margin.

138

A factor, certainly.

139

Right. :wink:
So why weren’t the floor workers given 40% raises?
Don’t answer that, it’s rhetorical.

140

In the 9 months prior to the 2020 elections, Donald Trump’s administration lost 16 million jobs, and he gained votes despite being the most obvious one-term President since Herbert Hoover.

The axiom may have held a lot of water in 1992, but it obviously didn’t just 3 years ago.