What is the secret of low inflation?
Friday, 13 January 2023
Hello from inside Germany,
Yesterday I tormented you with a long text. To compensate, today, just a one-minute text – and this photo.
It shows an advertisement in the window of my favourite organic supermarket.
The ad is headlined with "inflation brake" (Inflationsbremse), meaning that prices in the grocery are low despite inflation.
That's precisely what is necessary to fight inflation. Low prices. And what is needed to achieve low inflation in the long run (besides an independent monetary policy)? Right, competition!
Without competition, no low prices.
We should never forget that.
Because societies tend to form monopolies. Because those who are powerful (whether in politics or business) do a lot to stay powerful. One way to do so is to restrict competition, to prevent new competitors from entering the market.
Whoever is trying to establish monopolies should never be successful!
The Strolling Economist
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