posted on July 1st, 2008 in Best Practices, Commerce, News 

Something Completely Different: Eyes on the Price

This is going somewhere, I promise.

In 1969, the Ford Mustang Mach 1 sold for $3122.

In 2008, the comparable GT MSRPs for $27,420.

One thing these two commercials make clear is that the Mustang is as American as a rapidly diminishing attention span. So why does the car cost 9 times more 4 decades later? Everyone knows it has something to do with inflation. But what exactly? And more importantly, what does this have to do with you and your merchandise sales? Everything. So watch this video.

M3 and You

“Don’t know about you
but I am Un Chien Andalusia
wanna grow
up to be…
be a Debaser.”

Debaser, The Pixies

Look, you’re already a business person. Whether you do an order a day or 5000, you’ve already crossed the threshold from being an artist to being an artist-entrepreneur. It’s no small accomplishment, but if you’re not paying attention to what is happening in the financial system then you’re missing something with potentially large implications for your business.

So the short answer is that supply of US Dollars in circulation is growing…  So much so, some say, that the Federal Reserve decided to simply stop reporting it.

The redline ending corresponds to the date the Fed stop putting out their report. Private sources such as Shadowstats.com have jumped in and grabbed the baton, trying to reconstitute M3 from public sources. This picture is the purple line labeled “M3-SGS Continuation.” So, according to this source, annual money supply growth is now at 17%. As the CNN reporter points out in the YouTube clip, the more shares you issue in a company, the more you dilute the stock. Similarly, the more money you put into total circulation, the less each single unit buys.

Okay, pretty simple.

Money supply growth isn’t new. But usually its growth glacial enough to not draw scrutiny from an unsuspecting public. But if this source is correct and we’re on track for 17% growth in a year then we’re in trouble.  Even if it was 10% we’d have to be paying very close attention.  Incredibly, the most common measure of inflation, the official government numbers, have long since removed “Food” and “Fuel” from the calculation.  You’d have to really be nuts to miss this happening.  Dizuh.  A couple of months ago, one of my favorite Austin restaurants eliminated most of their breakfast menu, raised the price of their Poquito Migas by 20% and went to “countertop service” for breakfast to reduce the cost of having employees there all morning serving breakfast.  Businesses are taking such actions everywhere.

Why Tell You this?

Simple.  You’re a business too. You’ve got costs.  And if you’re paying attention, you’re seeing them go up.

• Do you sell t-shirts? Has the cost of blanks gone up? How about ink?
• Do you sell paper products like cards or comics? Have you noticed ink and blank paper costs more?
• Do you sell DVDs? Is your duplicator charging you more for dupes?
• Do you pay for packaging? Is your corrugate supplier charging more?

Your vendors, at least the ones most aware of their own costs, are bearing increased costs from THEIR suppliers. This may already be translating into increased costs to you. Rather than passively endure the squeezing of your own margins, you need to be looking at ways to make sure you’re not the one losing in the end. If your suppliers aren’t raising prices then they may be lowering quality or quantity.  Why? Because it’s the same difference.

Other Strategies

At Amplifier, we are encouraging our clients to add Print-on-Demand products. Why? Because they’re not required to outlay much if any cash up front. Their end audience finances each product as it is ordered. In fact, they’re often covering the printing/shipping and handling costs and STILL delivering margin back to the content creator.

Even here, our costs are going up.  Vendors have raised the price of our paper by 10% and of course we expect this trend to continue. Ink costs are behaving similarly. We’re rolling with it.  If all this talk about money supply gets you excited, well, our condolences.  Sadly, we’re right there with you.  Experts disagree on where all this is going, so we don’t pretend to know the future.  Here are some really interesting and differing opinions on where things are going.

• Jim Puplava - like John Williams of Shadowstats, Jim believes hyperinflation is coming to US
• Mike Shedlock, aka “Mish” - Believes a Japanese-style deflation is coming to the US
  
• Nouriel Roubini - Econ professor at NYU - Expects Stagflation

Forewarned is forearmed.