It has become clear to me from reading this forum over the past couple of years, that when the price of something rises, especially if it rises in real terms or relative to incomes, then that thing must be in a bubble, and a reversion to mean is inevitable. This is certainly very true of cigarette and tobacco prices.Australian cigarettes are some of the most expensive in the world. A 2006 study showed that only six countries in the whole world had more expensive cigarettes than Australia, in US Dollar terms, and given the rapid appreciation in the Aussie dollar since 2006 it is likely we are even higher up the table now, possibly the most expensive in the whole world.The Australian Cigarette and Tobacco Ponzi Scheme (A.C.T.P.S.) has been fueled by vested interests and excessive government taxation, resulting in almost a tripling of the cigarette to income ratio since the nineties. This sharp deterioration in the affordability of cigarettes is much larger than the equivalent price/income ratio rise for house prices and virtually all other goods and services. Clearly this is an unsustainable situation, and like all Ponzi schemes, when new buyers are priced out the market will eventually collapse under its own weight.The chart below highlights some of the misguided government policies that drove the price of Australian cigarettes into bubble territory. We can see that the price of cigarettes was steady for a long time (this is the historic norm), but started to rise sharply after the government began to interfere in the market, fueling the bubble with never-ending taxes.And finally this next chart shows just how much cigarette prices have risen in real terms, booming far in excess of CPI and beyond any fundamental support. Such a rapid increase in the price of any product is unsustainable, and clear evidence of a bubble. Nothing can defy gravity forever. For cigarette prices to return to their historic price/income norm, prices need to fall by at least 60%, however given the fact that the government will continue to try to support this bubble through increased taxation as prices collapse, it's more likely the crash will only be in the region of 40%.I look forward to the day when this bubble finally collapses and the great Australian Cigarette and Tobacco Ponzi Scheme (A.C.T.P.S.) is but a footnote in history.Sources...