The Horror of Falling Prices

Gary North writes (behind a paywall):

Three days ago, Google announced a spectacular price cut in cloud storage. It cut prices to 2.6 cents per gigabyte. That was bad news for Amazon, and good news for users.

Here was the sequence of events. On March 25, Google cut the price to 2.6 cents per gigabyte. I went to Amazon to check prices. Lo and behold, I discovered that the price was 8.5 cents/GB. In other words, Amazon had already cut prices by a third since September. On March 27, I checked again with Amazon S3, and I found that, as of April 1, the price will be 3 cents/GB.

This means that, in a period of seven months, the price of an indispensable cost of doing business has declined by 76%. This is incredible. Here is a service that large companies use 24×7, and without any prior warning, the cost of purchasing this service declined by 76%.

“Good news for users” indeed.  And yet, mainstream economists, professional Fed watchers, and political shills, speak of the dire consequences of falling prices.  Falling prices are a good thing.  Of course, a bust which follows a boom is painful, but the idea that the central bank should take it upon itself to generally “stabilize prices,” that is, not let them fall, is silly.  Falling prices make happy customers.

Nobody goes to the store hoping to buy less with their money.


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