Markup percentages reveal why it is possible for a farmer to feed thousands of people, but still have trouble feeding himself. When he goes to the supermarket, he must pay retail. The earnings on his apples are significantly less than what others enjoy. The next chart highlights the difference between what he earns and what he needs to spend on his own apple. When everyone works at a 10% mark-up, he can afford his apple. But at the higher percentages, he cannot afford to purchase his own output.
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Inflation distribution by Steve Consilvio
In our own way, we are all farmers. It is difficult for everyone to create more revenue than expenses, when the base mark-up is high. Budgets are a coping mechanism to a self-sustained problem.
The most common response to inflationary pressures is to charge-more and buy-less. Politicians, businesses and individuals seek to increase revenue and cut spending. This behavior worsens the collective condition with which we are struggling. The changes in the BSPD volume are the result, not the cause. The micro determines the macro. The alleged short-term solution compounds the long-term problem and drives the boom and bust cycles. The entire economy is teetering on the points of extreme profit. Huge gains quickly become huge losses.
Even though it seems counter-intuitive, a lower markup percentage is best for everyone: workers, consumers, businesses and government. Inflation is not a mystery. It is the result of compounding percentages. We have been brainwashed to believe that profit is good and more is better. Budgeting offers no help. Measuring closely does not change what is being measured. Only a lower markup percentage can create a pricing equilibrium, reduce wage disparity, and reduce debt. The purpose of paper money was to support a cash economy. What we have today is a debt and inflation economy. Very little cash is in use.
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