Monday, 14 September 2015

Falling Prices Should Be The Norm

If I'm prospering as the first guy in this part of BC to build 4x2 floor trusses, pretty soon my competitors will be selling them too and the price has to drop. If prices aren't dropping over time, something's wrong with the market.

From John Mauldin: "Ever-lower prices are the natural result of a market economy. As people learn to produce more with fewer resources, competition, especially in the form of Schumpeter’s creative destruction, forces prices downward.  In a truly free and competitive market, it is only the debasement of the currency that allows the conditions for prices to rise. All things being equal, if the price of something is not falling over time, it raises my suspicions about competitiveness."

There you have it.  Every year the dollar will buy more in a healthy economy. When it doesn't, your government is siphoning off spending money by debasing the buck.  (Tweaked by fractional reserve banking and the speed of money).

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