Now that inflation is here to the point where the government can no longer pretend it isn’t, the junior partner in Canada’s ruling Liberal/Socialist coalition has been busily pillorying grocery store CEOs for their “$1 million dollars per day in excess profits”.
There is no such thing as "excess profits".
Only excess government.— Mark Jeftovic, The ₿itcoin Capitalist (@StuntPope) April 10, 2023
Now the Canadian corporate media is joining the chorus, chiming in with a survey that purports to show how
“Canadians think grocery chain price gouging is the main reason food prices have been rising in Canada. “
According to the survey, 31% of Canadians think that – but as it typical with corporate media agitprop, it is framed as though this is the prevailing sentiment.
Which came first? The perception that grocery stores cause inflation? Or politicians and the corporate press brainwashing the public with this messaging until a growing number of them come to believe it?
Grocery stores have pretty thin margins. In a case like Loblaws (Singh’s scapegoat of choice) it’s about 30% gross, and net is 3.7% based on last quarter’s figures.
And while consumer staples tend to hold up better during recessions and tough economic times, they are typically boring, stodgy and unglamorous.
They don’t “moon” during up-cycles, and nobody gets lauded for owning or allocating to them – but some of the more seasoned and responsible fiduciaries (like pension funds and labor unions) do tend to allocate to them because they are: solid, predictable, and actually pay a steady dividend.
Where’s the crime in that?
Apparently, it’s in running a solid business that can maintain their shareholders, including those labor unions and pension funds – and just as importantly, do it without laying off employees. Even worse, it seems, is that they are able to do so without needing government bailouts and special legislation in order to survive like their counterparts in the Canadian media.
Why grocery stores?
Two years ago we were sticking “Support our front-line workers” signs on our lawns. Now we are telling everybody that they all work for evil, price-gouging corporations.
If Jagmeet Singh wanted to demonize an industry that unambiguously profiteered off the misery of society throughout these challenging times, could he have possibly come up with a better candidate?
Loblaws’ gross margins have been declining over the past year, despite the inflation-driven rise in the top line. Contrast with Pfizer, whose gross margins and net profits literally exploded under worldwide vaccine mandates that effectively made their product compulsory, despite the mounting evidence that they were never adequately tested, never actually worked, and were not even safe.
Pfizer’s gross margins are 65%, more than double Loblaws. Their top line revenues were $100 billion USD for 2022, giving them a $65 billion gross profit.
In other words:
- Loblaws operating profit margin = 3%
- Pfizer’s operating profit margin = 36%
- Loblaws net income was $438 million on roughly $13B total revenues (CAD)
- Pfizer’s net income (profits) was $36 Billion on $100 Billion in Revenues (USD)
Maybe Singh should be picking on Big Pharma instead?
The real reason for inflation
Of course, we live in a pharmatocracy now, and blaming grocery store chains for cost inflation is straight out of the Marxist-Leninist playbook. Keynes was apparently quoting Lenin when he wrote the famous “best way to destroy the capitalist system was to debauch the currency” passage. We’ve all seen that one a million times, including Keynes’ comment on it that,
“The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
At first glance, one might think Jagmeet Singh is among those who can’t diagnose it. But I doubt that. Lesser known lines from that same Keynes passage exposed the ruse of demonizing those whose concerns are able to withstand government-induced inflation:
“By this method [the State] not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security but [also] at confidence in the equity of the existing distribution of wealth.
Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become “profiteers,” who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat.
As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.”
Lenin’s passage was never sourced beyond Keynes’ commentary on it. It is possibly apocryphal, albeit authored by a Marxist nonetheless since it turns out Keynes was a commie anyway.
To get to the true root cause of inflation, we find it in the words of Milton Friedman:
“Inflation is always and everywhere, a monetary phenomenon. It’s always and everywhere, a result of too much money, of a more rapid increase in the quantity of money than an output.”
You look at the money supply. Here is Canada’s long-term chart:
In slightly under my lifetime, Canada’s gross M2 went from $38 billion in 1968 to $1.8 Trillion in 2020, that took 52 years.
Then when 2020 hits, we see the angle of the slope accelerates. M2 money supply moves from $1.8 Trillion to $2.4 Trillion, adding a full 33% onto the money supply in under two years.
The graph exemplifies the old adage of “gradually, then suddenly”. At some point, inexplicably, inflation hits. Gee, I wonder where that came from?
If politicians or media pundits are blaming businesses (whose supply chain costs are skyrocketing) for inflation, you are either listening to somebody who is profoundly ignorant, deliberately deceptive or both.
via zerohedge
