Home Site Map

Go Back   Kitco Forums > The Markets > The Economy, Banking, Markets and Global Stocks discussion group
Register FAQ Members List Calendar Search Today's Posts Mark Forums Read

Thread Tools Display Modes
Old 04-25-2012, 02:59 PM
Atlas Shrugged's Avatar
Atlas Shrugged Atlas Shrugged is offline
Join Date: Mar 2009
Posts: 6,955
Default How to increase corporate margins (or how I learned to love the FED)

Wrap your brain around this:

The FED is trying to "slinky" the economy. What does this mean? Well, as raw material inputs go higher due to inflation, the only way to increase margins is to become more efficient. However, if the FED runs up prices, then takes away the punch bowl and allows the market to drop, what gets hit first? Commodities. So, take away the punch bowl, let deflation sneek it's head in and drop the commodity cost. Then, 6-8 months later, juice the market with more printing.

What happens? Well raw input costs drop, companies downsize, etc. BUT they DON'T lower prices. Prices are sticky. So when the input costs drop, company margins can expand. If you can keep doing this, margins can continue to expand.

Just a thought.
Partial Freedom Day - January 31, 2014
We are headed toward an economic singularity. Be prepared or prepare to fail. Break free from the normalcy bias; the event horizon approaches.
Reply With Quote
Old 04-25-2012, 04:24 PM
fishing for shiny fishing for shiny is offline
Join Date: May 2009
Posts: 216

My thoughts.
Corporations also lower costs by hiring immigrants for cheaper or slash benefits and/or wages to existing workers or just move the factory to a much lower wage country.
They also reduce the net amount in the same package and don't lower price.
Or boost productivity without a wage boost.
I think that this hides inflation by not raising the price but lowering the costs nominally.
The costs have been lowered but the price stays the same.
And of course if there is any left over they boost CEO pay or dividends. So all the profit/benefit goes to the top 10%, as usual.
The consumer doesn't see it or really benefit because the quality usually goes down.
If they did everything in this country, with rising fuel and health care and insurance costs. And with wages adjusted for inflation and productivity.
The price inflation would be more apparent.
And they have to keep on doing it to keep prices from rising due to inflation of the monetary units.
Globalism, corps will shop the world for the lowest costs for materials and labor.

Corporation: An ingenious device for obtaining profit without individual responsibility.
Ambrose Bierce

"They deem me mad because I will not sell my days for gold; and I deem them
mad because they think my days have a price. ~Kahlil Gibran"
Reply With Quote

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off

All times are GMT -4. The time now is 06:47 AM.

Copyright@ 2007 Kitco Inc.