Ok but after covid, prices skyrocketed compared to pre-covid levels and we got massive inflation. Wages didn't suddenly skyrocket at the same time, hiring rates didn't go through the roof, corporate profits did though. So why would prices suddenly returning to pre-covid levels require everyone to be fired and customers to disappear when the economy was working great before? Would it just be that companies would start mass layoffs to prevent a short term decline in quarter on quarter profits which would start a negative feedback loop?
Prices drop for only one reason: people can no longer afford to buy the products.
The underlying reason can vary (war, crop failures, rising oil prices, etc.).
When a specific group of people can no longer afford to buy products, the producer will lower prices in order to make sales.
The cost of the plant, raw materials and/or energy remains the same—or may even rise—so the only area where the producer has some control is staffing; consequently, non-essential roles are eliminated.
As a result, those people can no longer buy products either, and the cycle repeats.
That is how you end up in a negative deflationary spiral.
What socialists and unions call "corporate greed" is really just the essence of a business: making a profit.
If a company with 20,000 employees lays off 1,000 of them, it is terrible for those 1,000 people; but if they don't lay those 1,000 off and the company goes bankrupt, it is disastrous for all 20,000 employees—including the original 1,000.
Usually, socialists and unions get angry because the profit isn't distributed among the employees.
But when the company is running at a loss, or needs to fund investments, research, or fine payments, do the unions or socialists ask all the employees to chip in?
That profit needs to be set aside for those very things.
What frustrates me the most is that everyone actually knows this, yet they refuse to admit it.
Yes, businesses need to 'take a profit and reinvest', but HOW much profit do they need to make?
Australian banks made billions of profit last FY and also laid-off and offshored a ton of jobs. They make a huge portion of their profit from credit card and mortgage interest rates.
The big 2 Australian supermarkets have also made record profits by falsely advertising items as 'on special' and planning discount timings on the same products between them for the same prices. Our consumer protections agency have officially recognised this.
Yes, there are a ton of small businesses that won't survive if they don't "take their profit and reinvest." But there's a ton of corporate greed out there too.
These companies are not going bankrupt if they take a little less profit or pay their CEOs a bit less.
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u/cheapdrinks 5h ago
Ok but after covid, prices skyrocketed compared to pre-covid levels and we got massive inflation. Wages didn't suddenly skyrocket at the same time, hiring rates didn't go through the roof, corporate profits did though. So why would prices suddenly returning to pre-covid levels require everyone to be fired and customers to disappear when the economy was working great before? Would it just be that companies would start mass layoffs to prevent a short term decline in quarter on quarter profits which would start a negative feedback loop?