"The value of money is in proportion to the quantity of the necessaries of life of which it will purchase. That of the necessaries of life is all together independent of the quantity of money which can be had for them."
~ Wealth of Nations by Adam Smith
The amount of money that has been printed over the last number of decades is astonishing. When the U.S. detached itself from its monetary anchor (gold) in 1971, it began printing currency in earnest to fund its deficits. As a global reserve currency, this money liquidates the world; not to mention other currencies that peg themselves to the dollar. Financial institutions utilizing fractional reserve banking models, loans, and derivatives create even greater supplies of currency (M1, M2, M3, etc). Fresh currency entering market circulation is often intuitively spent by consumers instead of saved for reasons that they may not be fully aware.
Low interest-rates (i.e. cheap money) incentivize spending cash today because it'll be worth less tomorrow. In contrast, high interest-rates incentivize saving money because it'll be worth more tomorrow.
So we understand how low interest-rates lend to cheap money which is often readily spent creating what economists call an increased 'velocity of money' in the market place. This velocity of money enters various markets for purchasing goods and services. The supply of goods relative to the demand paid for by a rapidly growing money supply creates a system for which prices must rise. Even the most ethical, philanthropic producers/sellers are unable to swim against this economic current of price growth.
If you doubt this economic model then try selling your house, car, or labor for what it would sell for in 1950 and see if you can remain solvent.
Moore's Law, Cooper's Law, et al., contributes to our understanding of how developing technology and commoditization leads to better efficiency. This efficiency in labor/production reflects economically as downward pressure on costs, but depending on any particular market or niche, the upward pressure of inflation could still be greater resulting in a net positive increase in prices.
This is not to say that price gouging doesn't exist, but this is only possible if a buyer is willing to participate (i.e. purchase a product). For every seller needs a buyer to validate the asking price. If not, then prices must be lowered or the services discontinued. Yet, for all practical purposes, a buyer may only purchase goods if they have access to a supply of capital (medium of exchange). This rapidly-growing supply of capital is cheap money which contributes to the inflation we're witnessing in this hobby.
People often cite Sennheiser HD580/600/650's price decrease over the years as examples of how your dollar has not lost value. Contrary to this notion, this is more of an example of the laws or commodity principles I mentioned earlier. Sennheiser produced the first iteration of this series for over 23 years (HD580, circa 1994). They've become pretty efficient at manufacturing this series. Reduced manufacturing costs and little to no further research and development costs in a particular product can help a company outpace inflationary pressures (net negative) to help maintain a competitive pricing advantage with said product.
Can the same be said about a new-fangled flagship fresh out of the R&D department?
So, this post simply brings awareness to the term 'Money/Price Illusion' which is loosely defined as the tendency of people to think of currency in nominal rather than in real terms. Hence, the purchasing power of a $1 bill may actually be 50¢. despite the number on the note. When a seller prices their goods, they must account for this diminished value in purchasing power and accordingly charge double the price of the note.
....all part of the current trends.."cheap money".
