{"id":25868,"date":"2023-04-08T13:49:06","date_gmt":"2023-04-08T20:49:06","guid":{"rendered":"https:\/\/occupysf.net\/?p=25868"},"modified":"2023-04-08T13:49:08","modified_gmt":"2023-04-08T20:49:08","slug":"we-may-be-looking-at-the-end-of-capitalism-one-of-the-worlds-oldest-and-largest-investment-banks-warns-greedflation-has-gone-too-far","status":"publish","type":"post","link":"https:\/\/occupysf.net\/index.php\/2023\/04\/08\/we-may-be-looking-at-the-end-of-capitalism-one-of-the-worlds-oldest-and-largest-investment-banks-warns-greedflation-has-gone-too-far\/","title":{"rendered":"\u2018We may be looking at the end of capitalism\u2019: One of the world\u2019s oldest and largest investment banks warns \u2018Greedflation\u2019 has gone too far"},"content":{"rendered":"\n

BY WILL DANIEL<\/a> <\/p>\n\n\n\n

April 5, 2023 at 1:53 PM PDT (Fortune.com)<\/p>\n\n\n\n

\"A<\/p>\n\n\n\n

A People\u2019s Assembly Against Austerity protest on Oct. 2, 2022, in Birmingham, U.K.<\/p>\n\n\n\n

MIKE KEMP\u2014IN PICTURES\/GETTY IMAGES<\/p>\n\n\n\n

<\/a>When costs go up, so do profits? That\u2019s not how capitalism is supposed to work, but that is the recent\u00a0trend<\/a>. For over a year now, consumers and businesses, both in the U.S. and worldwide, have struggled with stubborn inflation. But the soaring costs haven\u2019t prevented corporations from raking in\u00a0record profits<\/a>. The companies in last year\u2019s\u00a0Fortune 500<\/a>\u00a0alone\u00a0generated<\/a>\u00a0an all-time high $1.8 trillion in profit on $16.1 trillion in revenue. Voices largely on the left side of the political spectrum have been sounding the alarm on this\u2014think:\u00a0Bernie Sanders<\/a>\u00a0in Congress or Jon Stewart\u2019s recent\u00a0grilling<\/a>\u00a0of former Treasury Secretary Larry Summers\u2014but now an economist at one of the world\u2019s oldest and greatest investment banks is singing the same tune.<\/p>\n\n\n\n

Albert Edwards, a global strategist at the 159-year-old bank Soci\u00e9t\u00e9 G\u00e9n\u00e9rale, just released a blistering note on the phenomenon that has come to be called Greedflation<\/a>. Corporations, particularly in developed economies like the U.S. and U.K., have used rising raw material costs amid the pandemic and the war in Ukraine as an \u201cexcuse\u201d to raise prices and expand profit margins to new heights, he said. And the French investment bank isn\u2019t just historic: It\u2019s one of the select banks considered to be \u201csystemically important<\/a>\u201d by the Financial Stability Board, the G20\u2019s international body dedicated to safeguarding the global financial system.<\/p>\n\n\n\n

Furthermore, Edwards wrote, in the Tuesday edition of his Global Strategy Weekly, after four decades of working in finance, he\u2019s never seen anything like the \u201cunprecedented\u201d and \u201castonishing\u201d levels of corporate Greedflation in this economic cycle. To his point, a January study<\/a> from the Federal Reserve Bank of Kansas City found that \u201cmarkup growth\u201d\u2014the increase in the ratio between the price a firm charges and its cost of production\u2014was a far more important factor driving inflation in 2021 than it has been throughout economic history.<\/p>\n\n\n\n

Typically, higher commodity prices and labor costs squeeze corporate margins, especially if the economy is slowing. But Edwards pointed to data released by<\/a> the Bureau of Economic Analysis (BEA) last week that showed profit margins still near a record high relative to costs in the fourth quarter. The strategist said he assumed margins would have \u201cdeclined sharply\u201d at the end of last year as the economy slowed, but instead, \u201cHow wrong I was!\u201d <\/p>\n\n\n\n

\"\"<\/p>\n\n\n\n

SOCIETE GENERALE<\/p>\n\n\n\n

Edwards added that he fears the \u201csuper-normal profit margins\u201d of corporations in the U.S. and abroad could eventually \u201cinflame social unrest\u201d if consumers continue to struggle with inflation.<\/p>\n\n\n\n

\u201cThe end of Greedflation must surely come. Otherwise, we may be looking at the end of capitalism,\u201d he warned. \u201cThis is a big issue for policymakers that simply cannot be ignored any longer.\u201d<\/p>\n\n\n\n

Edwards\u2019s note could be significant in bringing a viewpoint that has thus far lived on the progressive fringe into the mainstream. For instance, a debate over Greedflation broke out last month, during former Daily Show<\/em> host Jon Stewart\u2019s interview with Larry Summers<\/a> on his new Apple<\/a> TV show, The Problem.<\/em> As Stewart and Summers debated whether the Fed was right to pressure wages to fall by raising interest rates in its inflation fight, Stewart pivoted: \u201cWhy aren\u2019t we attacking corporate profit in any way? Because that\u2019s been estimated to be 30% of inflation, 40% of inflation?\u201d

Summers was quick to respond that he didn\u2019t think it was \u201ca tenable view that all of a sudden corporations became greedy.\u201d Edwards seems to be saying that it actually is quite tenable.<\/p>\n\n\n\n

Time to control prices?<\/h2>\n\n\n\n

Edwards proposed a controversial solution to fix the rise of Greedflation, which he said reflects his \u201cweakening confidence\u201d in the capitalist system itself. In a once unthinkable twist to \u201cthose of us who lived through the failed prices and incomes policies of the 1970s,\u201d Edwards said there is a tool for this kind of problem, and it\u2019s from that same decade: price controls.<\/p>\n\n\n\n

Price controls\u2014or when a government mandates the prices businesses are allowed to charge consumers\u2014have been blamed<\/a> for everything from the fall of the first Babylonian Empire in 1595 BC to the long lines at the gas pump of the Nixon and Carter administrations in the \u201970s. One of the most common stories about the supposed folly of price controls comes from the Roman emperor Diocletian, who enacted<\/a> an \u201cedict on maximum prices\u201d for labor, commodities, and more to combat rampant inflation in AD 301. But the edict, which included a death penalty for anyone who broke it, eventually backfired, creating a scarcity of goods and reliance on government wheat that led to its repeal.<\/p>\n\n\n\n

Edwards noted that many of his colleagues are \u201cless sympathetic to the use of price controls\u201d because of this history, but he argues their use may be warranted because \u201csomething seems to have broken with capitalism.\u201d<\/p>\n\n\n\n

The strategist referenced a paper by University of Massachusetts Amherst economists Isabella Weber and Evan Wasner, titled, \u201cSellers\u2019 Inflation, Profits and Conflict: Why Can Large Firms Hike Prices in an Emergency?\u201d<\/a> which found that corporations engaged in \u201cprice gouging\u201d during the pandemic and argued temporary price controls may be the only way to prevent the \u201cinflationary spirals\u201d that could come as a result of this gouging.<\/p>\n\n\n\n

\u201cLooking at their conclusions on how to deal with Greedflation, price controls seem to emerge as a favorite method of control,\u201d Edwards argued.<\/p>\n","protected":false},"excerpt":{"rendered":"

BY WILL DANIEL April 5, 2023 at 1:53 PM PDT (Fortune.com) A People\u2019s Assembly Against Austerity protest on Oct. 2, 2022, in Birmingham, U.K. MIKE KEMP\u2014IN PICTURES\/GETTY IMAGES When costs go up, so do profits? That\u2019s not how capitalism is supposed to work, but that is the recent\u00a0trend. For over… Continue reading → <\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[389],"_links":{"self":[{"href":"https:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/posts\/25868"}],"collection":[{"href":"https:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/comments?post=25868"}],"version-history":[{"count":1,"href":"https:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/posts\/25868\/revisions"}],"predecessor-version":[{"id":25869,"href":"https:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/posts\/25868\/revisions\/25869"}],"wp:attachment":[{"href":"https:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/media?parent=25868"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/categories?post=25868"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/tags?post=25868"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}