The complaints of inflation are insane.

[Kaitzilla]

The Swiss Government is urging UBS to buy Credit Suisse.

https://www.thestreet.com/banking/credit-suisses-days-are-numbered

Apparently the $54 billion dollar credit line was the last intervention the Swiss Central Bank was willing to do for Credit Suisse.

In 2022 UBS had a $7.6 billion profit and Credit Suisse had a $7.9 billion loss.

UBS and regulators rush to seal Credit Suisse takeover deal possibly by Sunday: reports

Credit Suisse, UBS and their key regulators are working out a deal on the merger of Switzerland’s two biggest banks, according to reports on Saturday.

www.marketwatch.com

It remains to be seen if UBS will get enough concessions from the Swiss to reluctantly acquire Credit Suisse.

Might know by Monday.

Wow, UBS will buy Credit Suisse for only $2 billion!

The UBS board will also be bypassed and get no vote on the deal as soon as the relevant laws are changed.

Any Credit Suisse shareholder will get about 50 cents per share, not in cash but UBS stock.

UBS agrees to buy Credit Suisse for more than $2bn

Swiss authorities engineer a deal that will combine the country’s two largest banks

www.ft.com

Swiss Central Bank will give UBS a $100 billion credit line to get the deal done.

The population of Switzerland is 8.8 million people, so $100 billion is a lot.

**Edit**
Blarg, paywalls

UBS agrees to buy Credit Suisse for more than $2 billion, Financial Times reports

UBS has agreed to buy Credit Suisse after increasing its offer to more than $2 billion, the Financial Times reported on Sunday.

www.reuters.com

 

[RobAnybody]

One thing I appreciate about these bank failures is that the whole "the FDIC is covering depositors" aspect of it has not been (widely) conflated with the godawful bank bailouts of the late aughts (which benefited the banks & their shareholders instead). I know some of the Fox-types are trying to conflate them, but most people *seem* to recognize the difference (I think?). It's encouraging, I guess.

 

[EnglishEdward]

....but most people *seem* to recognize the difference ...

I don't.

Please feel free to enlighten me !

 

[Akka]

I don't.

Please feel free to enlighten me !

Covering depositor means that the money is spent so that the individuals (you, me, the guy down the street) who put their saving in a bank account, won't lose their money. The investors who held the shares in the bank are left out.
Bank bailout means that the money is spent to prop up the bank, so that the investors don't lose their shares.

 

[Gorbles]

However, in this case, the depositors are effectively the investors anyway. It's not a bank in the sense that any of us can use it. This isn't to say it didn't have a use:

Why Silicon Valley Bank was so important to UK tech sector

SVB specialised in high-growth startups, solving problems other lenders would not touch

www.theguardian.com

But that use wasn't really relevant to us, or the man on the street.

 

[Samson]

Also by transferring risk from the banks to the taxpayer without the banks paying for it we are giving the bank value in just the same way as if we were giving them dollars.

 

[Narz]

 

[Kaitzilla]

OPEC was cutting oil production a large amount starting in May.
Now it will be cutting a million barrels per day more.

https://www.thestreet.com/investing/stocks/oil-surges-stoking-new-inflation-worries-on-opec-production-cuts

The USA annual inflation rate for November 2022 was 7.1%

Consumer prices rose less than expected in November, up 7.1% from a year ago

The consumer price index was expected to increase 0.3% in November, according to Dow Jones estimates.

www.cnbc.com

The USA annual inflation rate for December 2022 was 6.5%

Here's the inflation breakdown for December 2022 — in one chart

Inflation continued to moderate in December, a welcome sign for consumers. Gasoline prices plummeted and many other categories are pulling back.

www.cnbc.com

The USA annual inflation rate for January 2023 was 6.4%

January CPI inflation rate slows to 6.4% but monthly inflation rose by 0.5%

January's inflation report showed a continued decline from prior months. Investors are hopeful it will prompt the Fed to pause rate hikes.

www.usatoday.com

Credit cards are up to 19% on average.

All the interest rate hikes and people running out of money this year should stamp out the inflation eventually.

The USA annual inflation rate for February 2023 was 6.0%

Inflation cooled in February, yet remains stubbornly high

The Federal Reserve may face a quandary as it copes with still-high inflation combined with instability in the banking sector.

www.cbsnews.com

 

[Hygro]

I mean, raising the interest rates won't bring down food prices which seems to be a primary way everyone is hurting (way above "6%"). Demand for food is pretty inelastic, so it's still one of the clearest examples of this being a supply problem and not a bank loan driven problem.

Hence the thread title, in case anyone forgot exactly what's insane about the inflation discourse and complaints.

 

[Gorbles]

I'm not sure it's a supply problem when food chains are reporting excessive profits.

Much like the energy situation over here, it's because politicians benefit from not intervening.

 

[Hygro]

I have to appeal to very basic micro here, they can only price gauge because they have a monopoly position, which only exists in the context of being the big players who locked up the remaining contracts of a shrunken supply chain.

The root of the problem is showing itself to manifest as it does.

Worth noting that raising interest rates on the firm that monopolizes the sale of an in elastic good will not cut prices but raise them.

If the firm’s money factor of production gets more expensive, as a monopoly they will pass 100% of the price increase to consumers.

IRL it won’t be 100% because
a) they are not perfect monopolies
b) they don’t make perfectly efficient decisions

But the basics is supply shortage gives the ability to price gouge, neither steps in the signal flow is going to be reversed by higher costs of borrowing.

 

[Gorbles]

I'm not saying borrowing is relevant, but I guess it comes down to what counts as a "shortage" when food is intentionally spoiled instead of being redistributed. A monopoly isn't a shortage, imo. A shortage generally suggests a lack of control; a third party.

Monopolies are part and parcel of how high level capitalism works. Wealth concentrates. It's a pretty useful diagram to see how these brands are owned, imo.

And again, there's passing costs on, and there's inflating costs to pad their bottom line.

 

[Hygro]

I reiterate, a supply shortage gives existing large firms sudden monopoly power because the total supply is bought up and this locks out new entrants who normally, purely by threat of being able to exist whether or not they manifest.

The order is important. Supply shortage -> a shift from a more competitive market to a more monopolistic market.

 

[Gorbles]

Circles it is then

I'm reiterating that this monopoly predates any supply shortages. It was already in place. The way you're phrasing it reads as the monopolistic behaviour is emergent. Maybe that's the confusion here.

What supply shortages in particular are you referencing?

 

[Farm Boy]

Bumper crop, last year, midwest grains. Cattle might be at a low ebb in the cycle, I haven't really googled it, the beef producers were getting priced out in 2020 or so. California's drought-land looks like it's going to get a pass on water in 2023 for all its irrigated salt-the-earth agricultural bounty. Chicken has been getting hammered with bird flu, which is eggs, there is that. The rest has been been simple inflation. Often enough little enough of the price of your food is the supply of the food.

 

[Joij21]

The way you're phrasing it reads as the monopolistic behaviour is emergent. Maybe that's the confusion here.

What he's saying is that the big food distributors aren't that powerful during years when there is an excessive surplus in food production, because with so much volume (even though it would be priced lower) the sheer bulk of product makes it so that the amount of units they would have to purchase in order to aquire most of it would financially hurt then (it's pricing curve voodoo, if you have to buy 50 units at $40 to gain a monopoly that's significantly more expensive than if you need to buy 3 units at $400 to gain a monopoly). This in turn allows smaller and medium food distributors to swoop in and purchase the remaining crop that the big guy finds too burdensome during the excess year, which via competition then allows better pricing to funnel it's way down to the grocery store.

If there is a shortage total volume available is down, so the big guy can just outbid the little guy and take most of the crop for the lean year. He now having the lions share can now dictate what the price of the good shall be when it is resold to the grocery store causing hyperinflation.

 

[Gorbles]

What he's saying is that the big food distributors aren't that powerful during years when there is an excessive surplus in food production, because with so much volume (even though it would be priced lower) the sheer bulk of product makes it so that the amount of units they would have to purchase in order to aquire most of it would financially hurt then (it's pricing curve voodoo, if you have to buy 50 units at $40 to gain a monopoly that's significantly more expensive than if you need to buy 3 units at $400 to gain a monopoly). This in turn allows smaller and medium food distributors to swoop in and purchase the remaining crop that the big guy finds too burdensome during the excess year, which via competition then allows better pricing to funnel it's way down to the grocery store.

If there is a shortage total volume available is down, so the big guy can just outbid the little guy and take most of the crop for the lean year. He now having the lions share can now dictate what the price of the good shall be when it is resold to the grocery store causing hyperinflation.

Alright, I appreciate the explanation here, and this does make sense.

But we're seeing straight-up price gouging in the UK to an extent that the supply is unlikely to impact it. Also, it's unlikely to be fixed, because the supply changes that have happened are relatively permanent due to breaking off of international relations / agreements in the past few years. A mix of problems I guess.

 

[Joij21]

But we're seeing straight-up price gouging in the UK to an extent that the supply is unlikely to impact it. Also, it's unlikely to be fixed, because the supply changes that have happened are relatively permanent due to breaking off of international relations / agreements in the past few years. A mix of problems I guess.

Well you guys are an island with a population that far exceeds your own farmlands' ability to feed everyone. So you import food from the continent as well as North America. This in turn adds extra bottlenecks that would make things even more easy for price manipulation to take place.

Just look at Hawaii, they are an island and have the worst food prices in the entire United States. All one needs to do as a food distributor is own most of the food warehouses (that is inventory space) on the island. That way your competitors will be bottlenecked into having less storage space then you which in turn allows you to buy more than them. You essentially gain a monopoly on all food on the island and by gaining the lion's share you can now dictate pricing on all food that goes to the grocery stores. Theoretically one could become the island dictator this way.

 

[Joij21]

I think Henry Kissinger said something along the lines of "control the food you control the people, control the energy and you control the continent, control the money and you have the whole world!"

 

[Lexicus]

I reiterate, a supply shortage gives existing large firms sudden monopoly power because the total supply is bought up and this locks out new entrants who normally, purely by threat of being able to exist whether or not they manifest.

The order is important. Supply shortage -> a shift from a more competitive market to a more monopolistic market.

Are the margins for these firms increasing, decreasing, or staying the same?

What supply shortages in particular are you referencing?

For the UK it seems like anything you import is getting hit big-time by bottlenecks related to "taking back control" from Brussels...