So what happens if I raise my price a little bit?

It isn't so much the money supply, although the money supply will have an effect, it's really capacity utilization.

The next question that everyone has is, OK fine, Sal.

And going back to where we started this video, in terms of capacity utilization and what that might do to prices, this tells us that labor utilization is

And the inflation really started going once capacity utilization got into the 80 range.

They just can't get another credit card loan or a home equity loan.

So if anything, you could say that demand was maybe right around here.

And then Vikram is selling 400.

More money's coming to the bottom line.

These are our two major bouts of inflation, in the early 70's and in the early 80's, and those were when we had extremely high capacity utilization.

So the orange line is utilization. Up here we had like 90 utilization.

And the orange and I know you can't see it that well on YouTube , so I'll try to make it clear in my drawing,

And just when this Imran comes in, and he enters into the space, all of a sudden, what is the return?

Work...

W

It comes down to here. But notice once again, although here it's pretty close, but utilization dropped off a couple of quarters before inflation dropped off.

Actually, we touched on the chart where we showed that every major inflationary bout was actually stimulated, or was actually preceded, by a pretty big upturn in capacity utilization.

And the traditional notion of capacity utilization, and this is what my brain does when someone mentions it, is I think of industrial capacity utilization.

And that's the real big take away I wanted you to get at, is that high utilization of anything, of our aggregate capacity, prices will increase.

I've done a bunch of videos now on inflation and deflation and how they can be impacted by capacity utilization.

And let's say it just keeps happening and I realize that I can raise my prices all the way to 3 without affecting my utilization, without any impact on demand.

And we're online.

So, as long as we have a pretty high utilization and people debate on what is the level of utilization in lot of industries where it makes sense to raise prices.

So up here this is 90 utilization and then down here this is 70 utilization.

Work Vacation

So when's it going live?

The generalized prices were already increasing.

I imagine factories.

And in all these scenarios it tells me my operating income.

Edit Work Intervals

Modify Work Interval

We're going online.

About 10 days ago. Right after we launched the site.

Supply and demand was, let's say, pretty evenly matched.

We always have to be competing with each other and lowering our prices.

So if you accept that and I think it's a reasonable argument, because it's really based on common sense things then I think you'll buy the argument that, if you have very low utilization, it's difficult to have inflation.

But that's a good level. You want to be at around 80 utilization.

But essentially, the consumption and investment was being financed by other people's output.

And this comes back to what we talked about in the last video.

And actually I'll say two things.

Waste collection on time.

I already...

It's been live for more than 36 hours.

So you could view this as the beginning of a pretty significant uptick in prices, right?

You have prices increasing and then you have more capacity or more investment coming on.