The Third Leg of Low Prices

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Are we experiencing
inflation or deflation?

have various opinions. That’s to be expected because:

  1. When you
    ask 3 Economists a question, you get 4 answers.
  2. You could
    lay every Economist on earth end-to-end and they still
    would never reach a conclusion.

I am no Economist.
I work for a living. (With my apologies going only to Dr.
Gary North
.) Since I am not an Economist, I don’t have 2 answers
to the question, “Are we experiencing inflation or deflation?”

I wouldn’t
even propose one answer. It’s my guess that we’re experiencing a
kind of inflation but what do I know? I do understand, however,
that prices are remaining relatively low for several reasons.

It’s those
low prices I want to address here.

How Have
They Remained Low?

Consider the
rise of fuel costs over the past few years. To move items from point
A to point B requires fuel. When fuel rises, the price to move your
goods from their manufacturers to your local store increases. Prices
have to adjust to cover those costs.

Consider the
rise of housing prices the past few years. To afford those houses,
incomes have to rise (or costs must decrease in other areas). To
pay rising incomes, businesses have to raise prices to cover their
additional payroll demands.

Probably all
of us complain of the high prices at the pump. And probably all
of us complain of the high prices when we have to buy housing. This
is for good reason because housing prices have risen dramatically
and at unhistorical rates. Fuel prices — adjusted for inflation
— are not at historical highs but they seem to be only because of
the rapid increase we’ve seen over the past 2 years.

Having said
all that, the cost of living actually hasn’t risen as much as we
might think in the past decade. Some would say that historically,
prices adjusted for inflation have done very well and dropped in
many areas. Consider the sub-$1,000 desktop computer you can get
just about anywhere today.

Richard Russell
of Dow Theory Letters
(if you don’t subscribe — you should), perhaps the only consistently
successful financial newsletter published for 40+ years, has a theory
on why prices have remained fairly low, especially in the past 5
years or so:

  1. China (massive
    production which means many goods trying to find consumers to
    buy those goods, typically keeping prices very low)
  2. Wal-Mart

These two reasons
are almost synonymous because Wal-Mart has been called “China’s
outlet store.” I’m unsure who said that; perhaps it was Richard

The Left
Hates Low Prices

As an aside,
have you noticed how the left calls stores like Wal-Mart “Big-Box
Retail”? They think that — when said with just the right disparaging
tone — “Big Box Retail” makes Wal-Mart sound like a bad thing.

There’s a better
term for Wal-Mart’s stores, however. It’s “Inexpensive places that
make it easy for everybody — including low-income families — to
buy things they need.”

The left hates
it when consumers win.

Given the consistent
Republican spending increases (common in all recent Republican Administrations),
Republicans hate the thought of your children living debt-free.
With the left and Republicans (I refuse to call Republicans “right”
for several reasons), it’s truly astounding that prices haven’t
skyrocketed and sunk all of us into an eventual depression.

Likes You a Lot

Do you know
what one of Wal-Mart’s stated goals is? It’s fascinating and would
make the most effective and clear corporate mission statement ever
coined by any company: “Make America a less expensive place to live.”

Pure brilliance.

Enter: The
Third Leg of Low Prices

I believe there
is a third reason that prices have remained relatively low worldwide.
In addition to China and Wal-Mart, a financial mammoth has crept
into millions of homes worldwide.

This mammoth
has probably consumed your spouse already. Certainly it’s taken
hold of your teens if they buy music or movies or clothes (which
means it has taken hold of your teens!).

Mammoth: Thy
name is eBay.

A Libertarian’s

seem to like free markets. Actually, everybody likes free markets
for themselves. But Socialists (such as Democrats and Republicans,
with Ron Paul excepted) don’t like you having a free market.
They are control freaks and feel they are much smarter than that
old, outdated invisible hand of Adam Smith’s.

When it comes
to our own pocketbooks though, everybody wants a free market.

eBay is a fantastic
free market.

At the same
time, eBay is a stunted, controlled, hindered illusion of a free

Strange how
something can be both but eBay is.

Over 475,000
people now make a full-time living from eBay alone. Billions of
bids go through eBay’s system every month. You pay too much for
everything you buy if you don’t first check eBay.

It’s my contention
that the free market aspects of eBay helps keep prices down worldwide.
And eBay is a worldwide phenomenon. Nothing has ever come close.
Perhaps nothing ever will.

The “world’s
largest garage sale” has done a tremendous favor to you and to me:
kept prices as low as possible. Perfect price information at every
second and a superb (but not perfect) supply-and-demand matching
system keeps prices everywhere else in check.

Yes, even at
Wal-Mart prices have downward pressure due to eBay. eBay is one
of the few entities that puts pressure on Wal-Mart instead of the
other way around. It’s that invisible hand thing again.

The Good
and the Bad

Over the next
two weeks, I’m going to give you insight into eBay through two articles
here at Even if you never eBayed before (don’t
you hate it when people verb their nouns?), I will show you how
eBay touches your life.

eBay isn’t
all good. eBay isn’t a perfect free market and when it’s not, it’s
a nasty market. I’ll show you why.

yet, generally, the good far outweighs the bad.

need to know more about how eBay affects the lives of every person
on earth, not just those having a lot of fun (and making or saving
a ton of cash) buying and selling. Even if you’ve never been on, you are still affected by its presence. Fortunately, you’re
probably affected in a good way.

You will learn
to love eBay if you don’t already. Unless you’re in the government
and you despise low prices.

4, 2005

Perry [send him mail] might
be the earth’s most prolific computer book author with more than
75 titles but his passion is eBay. That’s because he’s so successful
there. If you’ve ever considered eBaying something, you’ll make
far more money when you read his newest book, eBay
eXtasy – The “Secret” to Why Buyers Will Happily Pay an EXTRA 99
(or More) for Each Item You Sell

Perry Archives

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