"When costs go up, so do profits? That’s not how capitalism is supposed to
work, but that is the recent trend. 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’t prevented corporations from raking in
record profits. The companies in last year’s Fortune 500 alone generated an
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—think: Bernie Sanders in Congress or Jon Stewart’s recent grilling of
former Treasury Secretary Larry Summers—but now an economist at one of the
world’s oldest and greatest investment banks is singing the same tune.
Albert Edwards, a global strategist at the 159-year-old bank Société Générale,
just released a blistering note on the phenomenon that has come to be called
Greedflation. 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 “excuse” to raise prices and expand profit margins to new
heights, he said. And the French investment bank isn’t just historic: It’s one
of the select banks considered to be “systemically important” by the Financial
Stability Board, the G20’s international body dedicated to safeguarding the
global financial system.
Furthermore, Edwards wrote, in the Tuesday edition of his Global Strategy
, after four decades of working in finance, he’s never seen anything
like the “unprecedented” and “astonishing” levels of corporate Greedflation in
this economic cycle. To his point, a January study from the Federal Reserve
Bank of Kansas City found that “markup growth”—the increase in the ratio
between the price a firm charges and its cost of production—was a far more
important factor driving inflation in 2021 than it has been throughout economic
Via Brian Beeler and Doug Senko.
*** Xanni ***
Chief Scientist, Xanadu
Partner, Glass Wings
Manager, Serious Cybernetics