Amazon is one of the most deflationary forces in economic history
Amazon doesn't care if it makes money. Jeff Bezos is laser-focused on market share. He's the perfect capitalist, he finds inefficiencies and does things cheaper.
"Your margin is my opportunity," he famously said.
The next target is the grocery market, which he announced today with a $13.7 billion acquisition of Whole Foods.
The market reaction elsewhere is telling. Shares of Wal-Mart (-6%), Kroger (-12%), Target and others are down. If Amazon can figure out groceries, they're going to squeeze competitors on price in the same way they have elsewhere. Yes, Whole Foods is a premium grocery store but if they can deploy the Amazon model there, they can do it at a discount grocer.
If you listen to the Fed, it's the most unlucky central bank in history. Every time they miss their inflation target, it's a one-off factor. This week Yellen blamed cell phone and pharmaceuticals. Yet when healthcare costs alone were driving CPI, they said it was a sign of a return to the old normal.
Well Amazon is the new normal. They're pure, unbridled deflationary capitalism and they're unstoppable. This is how the system is supposed to work. Margins on everything should be ultra-low and that's what Amazon does.
Don't even get me started on how Amazon will use an army of robots and computers to drive down costs further by eliminating employees.
This acquisition may mark the start of Amazon going for it all. They want to be where you spend every single dollar. They're going to undercut every competitor by slashing margins to zero and cutting costs with technology.
Every corporation that relies on monopoly or oligopoly pricing should be terrified.
"The balance of power is shifting toward consumers and away from companies," Bezos once said. That's the deflationary war cry.