50 Pics That Prove That Inflation Is Getting Out Of Control

Profits don't equate to inflation. There are 3 causes of inflation: demand-pull (excess demand driving up prices), cost-push (a supply shock, such as an OPEC oil embargo in the 1970s), and built-in (when people expect inflation and their actions in response to this expectation end up causing inflation itself). None of these has to do with corporate profits. If we examine today's inflation, we find that the first two categories are perfect exemplified in today's monetary policy. The Fed kept interest rates too low, causing an increase in money supply which boosted demand and the government also engaged in fiscal stimulus, increasing the money supply as well. This is coupled with a supply shock when COVID shut down the world's economies. Let me reiterate: No economist, no one cares about corporate profits when examing inflation. Corporate profits do not have any cause to inflation.

The economists don't care about it because those economists are on the side of the corporations. If you look at economists from outside the 'Chicago School', they will acknowledge the importance of the share of income taken by capital (which in this instance is effectively the same as corporate profits) in the distribution of goods. Although you are right that the recent rise in inflation is not caused by a rise in profits (because corporations trying to maximise their profits is taken as a constant), the reduction of such profits must be part of the solution.

These 3 types of inflation aren't ideas from the Chicago School, they're neo-Keynesian and Neoclassical (Friedman famously rejected cost-push as causing long-term inflation). Besides, some of the Chicago School's ideas, namely the Quantity Theory of Money, are accepted in Academia, even amongst the left. And where's your proof that most economists (including those from the Austrian or Chicago schools) are corrupt people who lie to help corporations? To your next point, about reducing corporate profits to alleviate inflation. I have seen arguments that doing this through taxation would bring down demand and stop inflation, but that argument ignores the fact that taxation has a more direct effect on supply than demand. Therefore, while taxes lower profits and hurt demand, taxation has a much more significant, harmful effect on supply, which exacerbates inflation even further. This is why bringing down inflation is mostly a matter of monetary, not fiscal policy, and is done through the Central Bank, not government taxation. Furthermore, I do not see how returns on capital affects inflation (are you referencing Piketty, R>G?). The equation MV=PQ doesn't include profits as a variable at all, and the 3 types of inflation I listed before also ignore corporate profits, possibly because inflation is treated as a monetary matter while corporate profits are a fiscal matter.

The Federal Reserve, for fears of a recession, kept interest rates at near 0 to boost demand. What happened, however, was that low interest rates increased the money supply and increased demand to unsustainable levels; this coupled with fiscal policy (such as stimulus and other miscellaneous spending) and the supply shock due to the pandemic shutting down the world's supply chain boosted demand and hurt supply even more, causing demand-pull, and, to a lesser degree, cost-push inflation. This is the cause of the high prices. Companies are not making record profits because, although they are selling their goods at higher prices, the supply shocks mean they're selling less of their products. The value is also devalued due to inflation for the aforementioned reasons, which explains that these "record profits" aren't the whole story. Besides, where's your source about these profits?

No, I think it depends on which metric of inflation you use. CPI calculates the costs of a so-called "Basket of Goods" which has all essentials normal people use, including food. Food is definitely included in CPI inflation calculation, which is the most commonly used. Here's my source. https://www.investopedia.com/terms/b/basket_of_goods.asp

The published inflation rate does not include food. "Core inflation is the change in the costs of goods and services but does not include those from the food and energy sectors. Food and energy prices are exempt from this calculation because their prices can be too volatile or fluctuate wildly." From investopefia.com. marketplace.org and bis.gov. it is referred to as the "core CPI". even if what you said was right, which it isn't, by your explanation food should lag BEHIND measured inflation, not ahead of it. I'm sorry, but in this case, you are wrong. I am not insult you in any way.

Core Inflation is one type of CPI. I supposed I was referring to different variations of CPI that include food prices. We were simply referring to different variations of CPI. We are both correct in that regard. Nevertheless, I still believe my original point that prices are different from the official CPI measure because of the Cantillon Effect, where the excess money supply is distributed asymmetrically in the economy. The reason I disagree with your final point and believe that the Cantillon Effect explains why food prices exceed the inflationary measures is that (according to the Cantillon Effect) the sectors of the economy where the money supply trickles last would see the greatest effects of inflation. These last sectors are almost always local stores and consumers, thus they see the highest prices. This explanation makes sense when considering monetary policy. Any time the Central Bank engages in quantitative easing, purchasing of Treasury Bonds, or lowering interest rates(1/2)

, the banking industry is affected first (as that is the industry where the money supply is injected), and the last sectors to be affected are the everyday consumers. (2/2)

Again, then the cost of food would not have gone up FASTER than overall inflation, which was the original post we replied to. What is happening today is the everyday consumers are being impacted BEFORE the banking industry, as proven by the prices increasing much faster than the banking industry. Have a good day.

Yes, the cost of food goes up faster than overall inflation because the effects of inflation are distributed asymmetrically due to where the excess money supply spreads first. This is the Cantillon Effect. The last sectors to receive the excess money supply (consumers) are affected the most, with price hikes. A good day to you as well.

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