This is because things go up in price at different speeds and to different degrees (i.e., not everything will increase in price by the same degree as inflation, which is an increase in the money supply).
There are a couple of things at play here, and I'll touch on several, taking a few points from both macro and micro.
If the money supply increased by 2x overnight, an average cantillionaire wouldn't go to the supermarket and buy 2x the amount of bread (or sweets, continuing with the previous conversation). They would spend it on things like stocks, real estate, LV bags, 911s, or bitcoin.
So, for these goods that are favored by the cantillionaires, their prices will increase in line with or exceeding M2 growth.
Relative to commodities, high-end snacks are closer to these scarce and desirable goods, and therefore they would increase in price more in line with CPI than commodified sweets. The cost of the ingredients in making the high-end sweets has not risen as much compared to the sales price of the finished good, so they are still able to maintain margins.
At a micro level, companies will continue to innovate and apply kaizen to their processes. So, if the pace of efficiencies gained from innovation and kaizen outpaces that of M2 inflation, that will also work towards keeping prices lower than inflation.
Libertariman
npub1647…4zx4
2023-10-11 07:21:58
in reply to nevent1q…9gfs
Author Public Key
npub16477vrdvula4dgwap3j0n3rqmwnyu0w9gpq3g5c33rf3a026le0sg24zx4Published at
2023-10-11 07:21:58Event JSON
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"content": "This is because things go up in price at different speeds and to different degrees (i.e., not everything will increase in price by the same degree as inflation, which is an increase in the money supply).\n\nThere are a couple of things at play here, and I'll touch on several, taking a few points from both macro and micro.\n\nIf the money supply increased by 2x overnight, an average cantillionaire wouldn't go to the supermarket and buy 2x the amount of bread (or sweets, continuing with the previous conversation). They would spend it on things like stocks, real estate, LV bags, 911s, or bitcoin.\n\nSo, for these goods that are favored by the cantillionaires, their prices will increase in line with or exceeding M2 growth.\n\nRelative to commodities, high-end snacks are closer to these scarce and desirable goods, and therefore they would increase in price more in line with CPI than commodified sweets. The cost of the ingredients in making the high-end sweets has not risen as much compared to the sales price of the finished good, so they are still able to maintain margins.\n\nAt a micro level, companies will continue to innovate and apply kaizen to their processes. So, if the pace of efficiencies gained from innovation and kaizen outpaces that of M2 inflation, that will also work towards keeping prices lower than inflation.",
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