I pray that more inflation hits America


It’s not just inflation that drives prices up. Some companies use inflation as an excuse to raise prices, and some CEOs openly admit it.

As inflation rises at the fastest rate in 40 years – up 8.3% in August 2022 and 8.5% in July – corporate profit margins appear to be eclipsing the rate of inflation.

Overall corporate profit margins improved to 15.5% in the second quarter from 14% in the first quarter, their highest level since 1950. Gross corporate profits jumped $175.2 billion in the second quarter after taxes, exceeding $3 trillion for the first time in history. .

William Meaney, CEO of Iron Mountain Inc. — an information management and data center company and member of the S&P 500 — told Wall Street analysts at an investor event Sept. 20 that the High inflation in recent years had helped the company increase its margins.

Meaney said he’s been doing his “inflation dance praying for inflation” for years, The Intercept reported.

On an earnings call in 2018, Meaney told attendees that “it’s kind of like a rain dance, I pray for inflation every day I come to work because…our number business is really driven by inflation…. Every point of inflation increases our margins.

Meaney said his company has been raising prices at a rate above recent high rates of inflation, which “obviously covers our increased costs, but…a lot of that trickles down to the bottom line.” It’s not just his business, he added. “People are seeing what FedEx, UPS and others need to do to actually run their business and pass on this inflation.”

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Meaney acknowledged that inflation may not be good for everyone. “I wish I hadn’t done such a good dance,” he said.

Black families will suffer the worst effects of inflation because they lag behind whites in income, wealth, savings and property. Necessities such as food, electricity and cell service account for a larger share of black families’ budgets, according to a study released by the Federal Reserve Bank of Minneapolis.

The wealth gap leaves many black Americans without funds to help offset rising consumer prices and puts increased pressure on their monthly income, economists have said.

When a shock like the pandemic hits the United States, its supply chain and its economy, “it’s going to hit us much harder,” said economist Nicholas J. Hill, dean of the HBCU School of Business. Claflin College in Orangeburg, South Carolina. “It’s worse for black-owned businesses.”

Federal Reserve Chairman Jerome Powell said his goal was to drive down wages and inflation. “In other words, Powell wants regular workers to earn less money, which would lower labor costs for businesses,” Jon Schwarz and Ken Klippenstein wrote for The Intercept.

This seems to increase corporate profits.


Many Democrats hope the recently signed Inflation Reduction Act (IRA) will help control corporate profit margins through its new minimum tax on corporations with income over $1 billion reported in financial statements. before tax credits and depreciation.

“Big corporations posting record profits when families stretch their budgets will finally pay their fair share under the new billion-dollar minimum business tax,” said the chairman of the Senate Finance Committee. , Ron Wyden (D-OR) in a statement to Yahoo Finance. .

Former US Labor Secretary Robert Reich has called for the profit gains of “excessive corporate power” to be brought under control.

“The inflation we are experiencing now is not due to wage gains resulting from excessive worker power,” Reich wrote in an op-ed for The Guardian. “This is due to profit gains from excessive corporate power. It is profits, not wages, that need to be controlled.

Reich, who served in the Clinton administration, works as a professor of public policy at the University of California at Berkeley.

“Earnings price inflation” — caused by firms “raising their prices above their rising costs” — is the key factor fueling inflation, Reich wrote.

Some economists fear the Fed is going too far in its efforts to curb inflation with higher interest rates, causing unnecessary suffering for American workers. Others predict that pandemic supply chain delays and excess demand will normalize without interest rate hikes. Others argue that high inflation is worth it if it means avoiding a recession and job losses. Reich is in the school that believes that cutting record corporate profit margins is the best way to slow inflation.

“Congress and the administration must take direct action on price inflation, rather than relying solely on the Fed to raise interest rates and shift the burden of fighting inflation to average workers who are not responsible for it,” Reich wrote.

Reich argues that since wage increases have generally not kept pace with inflation, wages “actually reduce inflationary pressures”.

“That’s why corporate profits are approaching levels not seen in more than half a century,” he wrote. “Companies have the power to raise prices without losing customers because they face so little competition.”

The Federal Reserve forecasts a nearly 1% rise in unemployment in 2023 — or more than a million people out of work — after an interest rate hike.

“While higher interest rates, slower growth and looser labor market conditions will reduce inflation, they will also hurt households and businesses,” Powell said in a recent speech. “These are the unfortunate costs of reducing inflation.”

Images: William Meaney, President and CEO of Iron Mountain, thumbnail image from https://www.ironmountain.com/about-us/leadership / Screenshot from video graphic from CBS News, https:// www.cbsnews.com/news/greed-is-corporate-profit-taking-raising-prices/


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