Her: “Oh, I like them, they’re nice…”

Him: “Cool. How much are they?”



Her: “Let me ask…”

A husband and wife.

Or a couple on their first few dates.

Frankly it could be any two people, enjoying time together, out shopping for a birthday gift.

Let’s say they’ve picked up a pair of sunglasses.

A quick glance in the mirror, with them on, and boom… “they’re nice…”

Then they check the price.

$99.

$9.

$900…

Whatever the price might be, the purchaser has to make a calculation, to decide if they are of suitable value.

Like all economic decision making the individual has a number of factors to consider.

Perhaps they’re literally the first pair they’ve tried on…?

Maybe they’ve been hunting all day for a suitable gift…?

Whatever the case might be, value is subjective, and always on a sliding scale as different factors change.

Crucially though, a price is a piece of information that carries within it vital detail.

In particular I like to think through supply and demand impacts.

Think of the sunglasses again.

The couple searching for a gift decide to continue looking.

They want to go and check the other shop up the road.

However another shopper rushes in just after them, a man, late, en route to watch his favourite team.

It’s a hot day.

His season ticket seats are directly in the sun.

He needs to make a quick decision.

“Those are perfect he thinks”

And boom… Decision made. He makes the purchase and away he goes.

Same sunglasses.

Same price.

Different economic calculation.

Now flip it around, and think of the retailer, who is making a margin on all the items in their store that they carry.

Maybe the sunglasses don’t sell.

Ever.

The price is deemed too high by shopper after shopper.

They’re stuck with stock.

This might be no problem at all for a period.

But then the Christmas period is fast approaching, and they need space on their shelves, so they decide to lower the price.

Boom.

Traction.

Prospective buyers love the offer and the sunglasses are sold.

Simple examples I know, but the point being, as humans we’re making individual decisions all day long about value.

Apply the same logic to other parts of your day.

Going to you local cafe.

Stopping in the petrol station.

Or picking up your weekly groceries.

You can see people everywhere making these calculations.

Indeed, just consider the supermarket aisle for a moment, with all those goods stacked ready for sale.

It’s quite incredible how many prices will have been analysed in order to have co-ordinated that experience.

Think of all the products.

All the inputs for each.

It’s an extraordinary feat of human ingenuity to have organised all those things into one place.

A carrot, as a simple vegetable, has to be sown, grown, harvested, cleaned, checked, packaged, and transported to market; all of which is translated into a price.

Indeed, admittedly not the time and place to go into, but there is a wonderful article somewhere about how much work goes into producing a single pencil.

You get the point.

Pricing hugely influences decision making.

Now, what happens when you take into consideration inflation?

Taking the same stance as the Austrian School of Economics, ie inflation is caused by money supply increase only, then you start to see a very different picture.

Someone, somewhere, can print their own money.

They can then give it to their closest friends.

The cantillon effect in full flow.

Well those people now have more money.

They can walk into the grocery store and pay a premium without worrying.

Or equally they can buy equities, oil, real estate…

The supply and demand dynamic is warped.

Retailers see a surge in demand at a certain price point.

Producers see a surge in demand at a certain price point.

The entire supply chain see a surge in demand at a certain price point.

Little do they realise but the signal they’re getting from the market is in fact corrupted.

Only a small fraction of the market has this buying power.

They’re incentivised to sell more.

To produce more.

But when this stock gets to market what happens?

There is no demand for it.

Then what happens?

Over supply means they must discount…

Then what happens?

The market crashes.

Again it’s a simplified example I know.

On a big enough scale, with everyone making these corrupted decisions, we get what is known ‘the business cycle’.

A phenomenon that is normalised in mainstream economics today.

Indeed, until I asked the question “what is money”, I’d spent my life following along with the Keynesian philosophy taught to me at business school.

Central banks good.

Government spending crucial.

Inflation necessary for growth.

But what if this is in fact a total lie?

What if corruption of the money causes astronomical capital miss-allocation?

How different would the world look on a sound money standard?

Crucial questions.

Which I’ve no doubt enjoyed grappling with.

I encourage you to ask them as well.

Best, Jake

Ps - look at the tree outside your window, with all the leaves on it, and think of each leaf as a problem in the world. Trace the leafs, along the branches, back to the trunk, and down the roots. Then consider the root of that tree as a money printer. Simple analogy yes. But very helpful to translate what I know see: money printing is the root of all the evil in the world today…