I don't think we're disagreeing here, at least not about the broad economic and technological dynamics. I agree that, in the large, technological improvements do improve your ability to meet a budget, including to feed yourself, and I think the examples you gave are great. I don't think he's off-base in appealing to that general principle; it's just a matter of failing to realize when specific cases deviate from the heuristic.

That is, it doesn't follow that every technological gain has that effect, and it doesn't mean that that year's technological gain canceled that year's gain in costs of necessities. It doesn't mean that a new iPad's being 50% "more powerful" translates into it providing the utility of 1.5 "iPad 1"s. And it especially doesn't mean that improvements purely for luxury entertainment goods can ever truly act as substitutes for necessities.

Dudley was speaking as if that past year's improvements in the iPad really did cancel, in some substantive way, that past year's gain in necessities. (Remember, the iPad was released in 2010, and the story is from 2011.) It's not relevant to compare to e.g. not having mobile videochat integrated into your phone at all (since we had that in 2010), or the efficiency of cars from the 70s.

>The few bucks you save by not topping up your oil can pay for more expensive bananas,

And as above, those fuel efficiency improvements happened over decades; there wasn't significant gain in the prior year that obviated the extra costs.

Edit: Furthermore, as in the other reply, I think price changes purely attributable to technology aren't relevant to the kind of inflation central banks care about, and shouldn't be regarded as offsetting the "too much money/too few goods" problem.