'Greedflation' - are we being price gouged by the usual suspects? At least tech profits bode well for Irish corporation tax take. Another 'isolated' bank in trouble.
- company revenue increases by 7% because its prices increased like other prices in the economy
- company costs increase by 7% also, in line with inflation
- hence profit (as a monetary amount) increases by 7%
- but the return on capital deployed is unchanged.
Yet the headlines often cite the profits going up and conclude it must be greed, without any of the further context that I see as being required to reach a conclusion that there are some excessive returns on capital that I would consider price gouging.
In the tech sector we have seen job losses so I admit my example probably doesn’t apply very well there. But I’m more thinking of the principle around how the narrative is often framed in the media (not how you framed it per se).
Hi Lads. Good discussion again.
Here’s a controversial one. Suppose:
- inflation is at 7%
- company revenue increases by 7% because its prices increased like other prices in the economy
- company costs increase by 7% also, in line with inflation
- hence profit (as a monetary amount) increases by 7%
- but the return on capital deployed is unchanged.
Yet the headlines often cite the profits going up and conclude it must be greed, without any of the further context that I see as being required to reach a conclusion that there are some excessive returns on capital that I would consider price gouging.
In the tech sector we have seen job losses so I admit my example probably doesn’t apply very well there. But I’m more thinking of the principle around how the narrative is often framed in the media (not how you framed it per se).