by Conner Brown takes the opposite view from us about fiat, which he believes causes inflation, but I found what he said about deflation quite interesting. I always knew that when a new product is brought to the market it is often quite expensive because its the amount of investment involved. Factories will need to be tooled up to manufacture the new parts, and new factories might even have to be built too. But as the years go by the company will pay off its debts for the all the tooling up and the design it had to invest in, so costs will start to plummet, resulting in a much cheaper products. But more cost savings are achieved in other ways too as the company finds cheaper ways of producing the product, plus their suppliers will be doing the same thing too. Add on to that improved
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Conner Brown takes the opposite view from us about fiat, which he believes causes inflation, but I found what he said about deflation quite interesting.
I always knew that when a new product is brought to the market it is often quite expensive because its the amount of investment involved. Factories will need to be tooled up to manufacture the new parts, and new factories might even have to be built too. But as the years go by the company will pay off its debts for the all the tooling up and the design it had to invest in, so costs will start to plummet, resulting in a much cheaper products.
But more cost savings are achieved in other ways too as the company finds cheaper ways of producing the product, plus their suppliers will be doing the same thing too. Add on to that improved transport and delivery systems, and prices can significantly be brought down. They have to do this to keep ahead of the competition, but also to improve their profit margins.
I often marvel when I'm in the shop about how they can produce something so cheaply considering the amount of people that need to be paid: drivers, labourers, workers, accountants, managers, cleaning companies, vehicle repair workshops, heating, building maintenance, you name it, plus taxes, etc.
Price Basics: Falling Prices Are Natural
Imagine a simple item in a competitive marketplace — let’s say a toothbrush. Now assume every year this toothbrush gets a little bit easier to produce. Perhaps machines get a little bit better at manufacturing, or supply chains get slightly more efficient, etc. If our consumer demand doesn’t change, what should happen to the price? It should decrease.
This should not come as a surprise. Free markets cause product prices to fall as industry becomes more productive and competitors fight for consumers with the lowest possible prices. This is a process that has been happening for thousands of years as humans apply their ingenuity to fulfilling the wants and needs of others.
Do prices always decrease? Certainly not! Plenty of common occurrences that hamper production or spike demand can cause price increases. My point is simply that on long time-frames, as humans invest their labor into becoming more productive, items that were once difficult and expensive become cheap and easy to produce. Thus decreasing prices are natural and intuitive.
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Conner Browb - Stop Calling Bitcoin Deflationary.