The Economy

Some of those headlines are just plain wrong.

What Brian Cornell himself said on that call was that they expected losses this year to increase by $500 million (in filings they reported $763 million in losses last year) and that shrinkage this year is going to surpass $1 billion. He said that organized retail crime has increased dramatically, but he didn't attribute all of their losses to it. He said it's having an urgent effect on his employees and customers, and that there has been an uptick in violent incidents in his stores. Target is not the only of the big retailers pointing to increasing losses, including a surge in organized theft rings hitting their stores and hurting their bottom lines.

 

It's not even a "fringe" theory. It's just ridiculous magical thinking.

Inflation is a monetary phenomenon. Unless you understand that, you shouldn't be discussing it, anymore than you should be discussing organic chemistry without understanding the role of carbon.

She writes something like that with no explanation of HOW companies have managed to circumvent the basic laws of supply and demand, if the idea of greedflation is correct. Is there a gun to consumers' heads forcing them to pay more than an equilibrium price? Or are they just stupid? Or is it that nobody has decided to compete in business anymore? There is no one who sees an opportunity to undercut all of those"greedy" producers, when you can easily sell for less and do very well?

https://cafehayek.com/2023/05/the-theory-of-greedflation-is-rank-nonsense.html

The fact that this stuff comes up is more of the dumbing down of the world.

Central banks around the world went crazy increasing the supply of fiat currencies all around the world, and did it on steroids with the pandemic as an excuse. We now have an inflation problem. Too many dollars (or Euros or Pounds, etc.) chasing too few goods. If you had a dollar in your pocket, it's worth a fraction of what it was worth, due to all of the new dollars that were created, and as a result, to buy anything, you need to hand over more dollars.

Why would the obvious cause and effect explain the rise in prices?

 

So you don’t have the capital to get into that business, so it must mean that nobody in the world does, right?

Off the top of my head, I can name name 20 to 25 integrated oil companies. If any one of them can sell for less than all of their competitors and earn more in the process, you think that none of them will do it to try to grow their business?

It’s possible. They are running a cartel, maybe. They meet in secret and have perfected the art of price fixing. It doesn’t explain why they suddenly decided to exercise that cartel power recently. … and historically, they seem to get greedy, then benevolent for a period of time, then greedy again, all done randomly. But OK.

There are at least 2,500 billionaires in the world, thousands of more investment firms / funds that are really well capitalized, all looking for a return on capital they have to invest. Any of them could squash that cartel, if it exists. None of them see an opportunity in that business you think is so badly mispriced?

In an inflationary environment, nominal profits soar. It’s especially true if you drill for oil, because your costs don’t change as much as they do for other businesses, but the price (which is largely DEMAND driven) does.

Consider this. U.S. tax receipts are booming too. Our government has raked in money over the last two years due to the inflationary environment (i.e. -- their "profits" are soaring). Is that “greedflation” too?

 

The problem for them (and by proxy for consumers) is that they started to see much bigger losses over the last two years.

Two things. Walmart might not have been talking about shrinkage much on their call, but that might be because Doug McMillon did it in December and it got a lot of attention at the time. Here:

As much as that Target call got a lot of attention, Walmart loses way more than Target does to shrinkage. ... It is a growing, and fairly significant, percentage of their sales. Shoppers definitely pay for it.

The other thing is that someone posted a tweet thread from someone doing amateur analysis where they were saying something to the effect of, "It's not real, they are just trying to scare people," and the supposed evidence of that was some lowball estimate of the percentage of shrinkage that was due to organized retail crime in the past, and extrapolating that to the present.

I read that wondering why someone would be so invested in trying to prove something isn't true. It's like people have a narrative that they start with and then strain to prove the narrative.

To put what he did into context. ... This year, mass shootings are on a record pace. Not just a record pace, but a pace that if it keeps up is going to obliterate the previous record for mass shootings. Would the person who did that say, "Well, if you look at shootings that occurred three years ago, there weren't as many, so what they are saying about shootings this year must be a lie"?

In the case of store thefts, he wasn't even doing that, because he was using made-up numbers that ridiculously low-balled things in the past relative to what the big retail chains are saying is their reality. There is no way to know the exact scope of the problem, but there was nothing quantitative about the supposed numbers he threw out there. What's clear, though, when you see that many retailers talking about it with regard to their financial results (and having to put numbers to it in regulatory filings) is that we are in a much different environment right now than we were even 3 years ago. I suspect -- but can't prove how much of a factor it is because I am not sure it is really measurable -- that the dramatic rise in consumer prices over the last 2 years has led to increased retail financial losses due to theft beyond what they saw in the past. Which is why you are hearing about it.