The situation leading to the deodorant-lid discovery is unique.
We’re in Charleston for the month of November. Yes, it’s dangerous. The odds of getting fat are high. From the Chubby Fish to all the 167s (you who know Charleston know), the restaurants here turn food into a drug. You gain weight.
And you’ll have to run the Cooper River Bridge. We didn’t. We walked it. The image here is of the Yorktown, across the bridge at Patriots Point. It’s an aircraft carrier that saw action in WWII and Vietnam. You should visit it and the Laffey, a navy Destroyer anchored right next to it.
It’ll make you grateful to be free, at Thanksgiving.
So, I was packing two different editions of deodorant coming to Charleston because I was slated to be gone more than a month from Denver. One ran out. I moved to the next one. And pulling the lid off, I stopped.
It didn’t feel the same. I grabbed the old one from the trash because we’re in an apartment at the Zero George Hotel and the trash won’t be removed till Friday.
I squeezed the lid of the old one. Inflexible.
Squeezed the new one.
Son of a gun.
The lid is flimsier on the new one. In fact, the whole container is thinner. The weight is the same, though: 2.7 ounces.
Unilever is giving us less, for more.
If you send millions of these things around, thinning out materials improves margins. Used to be it weighed over three ounces. So over time, the packaging thins, the amount of product decreases.
The price rises.
That’s called “de-sheeting.” It’s ingenious.
And it’s what comes from rising debt and rising prices. It’s not “evil corporations” stealing from people. It’s businesses trying to adapt to how governments steal from people via inflation – shrinking the money.
Businesses can’t shrink money. They can only shrink the deodorant lid.
There are two basic ingredients for every economic recipe: labor and capital. People and money. If the value of money decreases, money as an input into the recipe for making stuff must increase.
Got that? Money worth less, more of it needed.
Faced with having to put more money to work to make the same stuff, the makers of stuff will try to spend less on labor. People. So wages rise slower than prices.
Congresspeople love to berate “evil corporations.” They’re just trying to adapt to the shrinking value of the money input, which governments alone control.
And so it has been. Wages have not kept pace with prices since the 1970s when the USA abandoned the gold standard defining the worth of money.
At some point, the dam gives way and pay rises.
And prices increase.
And for the time that the increase in pay persists, people pay more for things because they have more money.
And then it stops.
Then they need to have cheap credit to keep paying more for things.
And so it has been. The use of credit has risen dramatically the past 40 years.
To help, the Federal Reserve lowers interest rates. Rates have fallen on a trend line since we left the gold standard in the 1970s.
And businesses try to bump up prices of things to compensate for the higher cost of labor, the diminishing value of money.
To offset any spread, businesses make lids thinner. Or whatever.
And what happens if the cost of credit goes up?
It’s happening now.
The Federal Reserve is raising rates. So the money is worth less, the cost of labor is higher, and now the cost of the replacement for the gap between the two – credit – is higher too.
The reason people like Ron Paul are consistently wrong about the impact of rising debt and rising prices is they don’t understand how thin a deodorant lid can get.
Businesses find ways to suck costs out of production in the 21st century, and the sustainability of our system depends on the continuity of this principle.
In the 19th century it was the opposite, as I explained here. Make stuff as the value of money stays the same and distribution and production improve and everybody is richer.
If we could apply modern principles to this 19th century notion, we could last forever. A system that depends on making thinner deodorant lids has limited room.
How thin can lids get? I don’t know.
I do know that to fix the problem, we’d have to shrink the size of government by 50%.
Nobody is willing to do that.
So we’ll live with thinner lids. And more short-term tactics.
And we can.
Now, go and eat well, and give thanks!