State of irreversible inflation
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The TS asked only a simple question and deserve a simplified answer, as any ordinary layman is entitled to.
We can show off our education, impress with full regurgitation of facts, copy and past onto this thread, but in the end, will it answer the ordinary layman's question?
No, thus it would be our responsibility to convert a complex issue into simpler form, so that more may understand and if interest is piqued, it may lead him to seek deeper understanding.
My personal insight is that inflation will always be here. Inflation in its basic form means more money to purchase an item than in the past. Example, a cup of kopi-O cost only 60cts 10 years ago, and yet today you will need to fork out 90cts.
Inflation is irreversible.
Each year, more resources are unearth and manufactured. With such wealth, it creates more employment ( not rise in wage ). With more people having money, lifestyle choices increases and the need for more better products creates a demand, resulting in a rise in prices by producers to sell to the highest bidder.
Most democratic govts will use a Consumer Price Index CPI, to keep track of prices, using a basket of common essential goods as a GUIDE, and will attempt to use monetary policy to keep it under control, such as value the dollar lower, interest rate hikes, tightening or releasing money supply, etc.
Planet Earth had not run out of resources, nor anytime soon. Furthermore, with our knowledge built up over time in science and technology, we had learnt to increase agricultural yields and improve land use for maximum optimal output. Thus, wealth will continue to be generated, and employment continue to grow, and mortality rates will keep the population size sustainable to match our productive and resources output.
So, when you pay for that cup of kopi-0 at 90cts, it is an irreversible occurence. The only way out of this trap is to increase your wage by getting in higher value well paying jobs, either by education or experience with an attitude employer will employ.
Again, this is only my perspective, made simple for easier comprehension, as best as I can. I make no claims that I am right, nor is my perception a final answer to TS question, for there are deeper and more complex levels of comprehension only a course in it can inflation and its mechanics be fully appreciated and be employed for jobs requiring an understanding for it.
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I don't suppose the term "deflation" has any meaning to you beyond a deflated balloon if that's what you mean by "simplify for the laymen".
Japan's CPI is still falling .
How can inflation be irreversible?
Don't take a slab of butter and smear it on everything you see....that's not call simplifying at all, you're just confusing people by supplying the wrong information!
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Originally posted by SBS2601D:
I don't suppose the term "deflation" has any meaning to you beyond a deflated balloon if that's what you mean by "simplify for the laymen".
Japan's CPI is still falling .
How can inflation be irreversible?
Don't take a slab of butter and smear it on everything you see....that's not call simplifying at all, you're just confusing people by supplying the wrong information!
*double post*
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Originally posted by SBS2601D:
I don't suppose the term "deflation" has any meaning to you beyond a deflated balloon if that's what you mean by "simplify for the laymen".
Japan's CPI is still falling .
How can inflation be irreversible?
Don't take a slab of butter and smear it on everything you see....that's not call simplifying at all, you're just confusing people by supplying the wrong information!
Ok. If I am wrong then why not show us all here how RIGHT you are in response to the TS? I am sure economists around the world would like to know too, afterall you claim another is wrong, which means ONLY you CAN be right.
I'll be waiting.
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I'm not saying I'm a pro, but I'm saying that saying inflation is irreversible is wrong bcos I've already cited empirical evidence that states otherwise. Is that lost on you as well??
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Originally posted by SBS2601D:
I'm not saying I'm a pro, but I'm saying that saying inflation is irreversible is wrong bcos I've already cited empirical evidence that states otherwise. Is that lost on you as well??
"I'm not saying I'm a pro," - SBS2601D.What else are you ..er...NOT saying???
I am certainly sure one thing among many that 'you are not saying' is your reply to TS's simple query I cant possibly imagine why...
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Quit arguing for the sake of it...I've already pointed out inflation can be reversed if the conditions are in favour of it.
For reasons stated by steven, inflation will likely go on. Particularly food prices.
Not because inflation is irreversible!
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Originally posted by SBS2601D:
Quit arguing for the sake of it...I've already pointed out inflation can be reversed if the conditions are in favour of it.
For reasons stated by steven, inflation will likely go on. Particularly food prices.
Not because inflation is irreversible!
Arguing? LOL! Far from it. You were the one who pompously brushed my offered insight as WRONG, which means you must be a pro, but then you backed out and say you are not a pro, and then now you agree that inflation will likely go on.
Excuses, excuses, back pedalling, with one liners. Well done. I wont force you to do anything nor have the power to do so. You are what you pompously write, for all to see.
Cheers.
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To TS,
Since 2061D refuses to share his 'correct views' or the lack of it, then I feel responsible to share mine on the point of contention that 'inflation is irreversible'.
The opposite or reverse of inflation is deflation. Deflation in simple terms means producers cutting the prices of existing goods to woo a stagnant demand ( or the lack of demand). When that happens, it means doomsday is at hand.
Cutting prices is common, sometimes are gimmicks, sometimes due to prudent costings and better productivity.
It real circumstances it occurs when companies are not doing well, so have to sell their goods at lower prices, sometimes to break even their costs and worse still in bankruptcy cases, way below costs. It means doom for the company.
Pretty ok in isolated cases, but IF on the scale of total economies, its bye bye world.
When everyone is hoarding their money, producers become desperate and sell cheaply, each outselling lower and lower. Companies everywhere fold, employees laid off, suppliers unpaid, etc, the vicious cycle of poverty occurs. Doomsday, even for the rich as they become targets of crime.
No govt in the world worth their salt would allow deflation to occur. You can imagine the chaos. There are limits on how much govts can control, for their wealth are limited and not forever, not matter how much they have using it to prevent deflation from entrenching.
Once confidence is gone, everyone will hide behind close doors and closed wallets, driving themselve deeper into the doom.
Better to allow inflation to occur in manageable flutuating rates, with wise and prudent monetary policies to encourage wealth generation for everyone thru education, innovation and productivity, than to go cheap cheap cheap. That's the squeal of hens before they are slaughtered. And we are not hens, but thinking human beings.
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Don't see the problem if deflation is caused by lower import prices (raw materials and final products alike).
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Originally posted by xtreyier:
To TS,
Since 2061D refuses to share his 'correct views' or the lack of it, then I feel responsible to share mine on the point of contention that 'inflation is irreversible'.
The opposite or reverse of inflation is deflation. Deflation in simple terms means producers cutting the prices of existing goods to woo a stagnant demand ( or the lack of demand). When that happens, it means doomsday is at hand.
Cutting prices is common, sometimes are gimmicks, sometimes due to prudent costings and better productivity.
It real circumstances it occurs when companies are not doing well, so have to sell their goods at lower prices, sometimes to break even their costs and worse still in bankruptcy cases, way below costs. It means doom for the company.
Pretty ok in isolated cases, but IF on the scale of total economies, its bye bye world.
When everyone is hoarding their money, producers become desperate and sell cheaply, each outselling lower and lower. Companies everywhere fold, employees laid off, suppliers unpaid, etc, the vicious cycle of poverty occurs. Doomsday, even for the rich as they become targets of crime.
No govt in the world worth their salt would allow deflation to occur. You can imagine the chaos. There are limits on how much govts can control, for their wealth are limited and not forever, not matter how much they have using it to prevent deflation from entrenching.
Once confidence is gone, everyone will hide behind close doors and closed wallets, driving themselve deeper into the doom.
Better to allow inflation to occur in manageable flutuating rates, with wise and prudent monetary policies to encourage wealth generation for everyone thru education, innovation and productivity, than to go cheap cheap cheap. That's the squeal of hens before they are slaughtered. And we are not hens, but thinking human beings.
Question
Is inflation Irreversible ?
Steps :
1. Define inflation
Inflation is the inordinate, sustained and general increase in price level
ie the cost of basket of goods and services has increased over a period
of time usually monthly, quarterly or yearly.
2. Define irreversible
Irreversible means cannot change something back to what it was before
3. To rephrase the question
Is inflation irreversible ?
Can the increase in prices of the baskets of goods and services be changed
back to the original prices ?
4. Theoretically, it is possible to change the prices back to the original prices
ie inflation is NOT irreversible.
5. Empirically, there are few cases that the prices can be changed back to the
original prices ie most countries experienced inflation over the years with some
countries experiencing higher inflation rate while some countries experienced
mild inflation rate.
Though it is to be noted that some countries can experience deflation in some
periods of time.
6. It is to be noted that the inflation rate as measured by the formula
2009 Inflation rate = [(2009 CPI - 2008 CPI) / 2008 CPI] x 100%
has many shortcomings eg a 5% inflation rate will affect each individual
differently. In addition, the inflation rate will be different when the goods and
services in the basket are being replaced and new goods and services are
added into the basket.
Hence, the inflation rate of 20 years ago should not be compared with the
current inflation as the goods and services in the basket are different.
7. The reason for asking this question is inflation irreversible is probably due to the
concern of the rising prices and the falling purchasing power of money.
In economics, inflation is not a problem if the inflation is matched by an equal
percentage increase in productivity ie the increase in prices is equated with an
equal percentage increase in money income for everyone.
However, during inflation, there are some people who gain and some people
who lose and different sectors of the economy are also affected differently by
the inflation.
Indeed, the groups who suffered most during inflation are people whose income
remained fixed or with no income eg the pensioners, the aged, sick, handicap
and the unemployed.
Hence, we need the government to help these groups of people during inflation.
It is to be noted that the government has more taxed income when there is
inflation in the economy and so the government should use the increased tax
income to help these groups of people.
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Originally posted by Lee012lee:
Question
Is inflation Irreversible ?
Steps :
1. Define inflation
Inflation is the inordinate, sustained and general increase in price level
ie the cost of basket of goods and services has increased over a period
of time usually monthly, quarterly or yearly.
2. Define irreversible
Irreversible means cannot change something back to what it was before
3. To rephrase the question
Is inflation irreversible ?
Can the increase in prices of the baskets of goods and services be changed
back to the original prices ?
4. Theoretically, it is possible to change the prices back to the original prices
ie inflation is NOT irreversible.
5. Empirically, there are few cases that the prices can be changed back to the
original prices ie most countries experienced inflation over the years with some
countries experiencing higher inflation rate while some countries experienced
mild inflation rate.
Though it is to be noted that some countries can experience deflation in some
periods of time.
6. It is to be noted that the inflation rate as measured by the formula
2009 Inflation rate = [(2009 CPI - 2008 CPI) / 2008 CPI] x 100%
has many shortcomings eg a 5% inflation rate will affect each individual
differently. In addition, the inflation rate will be different when the goods and
services in the basket are being replaced and new goods and services are
added into the basket.
Hence, the inflation rate of 20 years ago should not be compared with the
current inflation as the goods and services in the basket are different.
7. The reason for asking this question is inflation irreversible is probably due to the
concern of the rising prices and the falling purchasing power of money.
In economics, inflation is not a problem if the inflation is matched by an equal
percentage increase in productivity ie the increase in prices is equated with an
equal percentage increase in money income for everyone.
However, during inflation, there are some people who gain and some people
who lose and different sectors of the economy are also affected differently by
the inflation.
Indeed, the groups who suffered most during inflation are people whose income
remained fixed or with no income eg the pensioners, the aged, sick, handicap
and the unemployed.
Hence, we need the government to help these groups of people during inflation.
It is to be noted that the government has more taxed income when there is
inflation in the economy and so the government should use the increased tax
income to help these groups of people.
Hey, I applaud your efforts to make it simplier for others to understand. Let's hope our new generation of youths will be better informed, and that both our elected govt and society had contributed much to take care of the less priviledged.
I note that you wrote inflation IS THEORATICALLY possible? No sarcasm intended, or argument for pettiness sake, but only a quest for further insights. Do you also mean that inflation IS NOT REALISTICALLY possible?
Trust me, I would be the first to want reverse prices. Perhaps possible for other resources rich nation, but our no resource country where most of our goods and raw material are imported?
HDB 3 rm at $15,000 in Redhill estate? Box on 4 wheels with safety features at $10,000? My favourite Kopi-O at ...er...em...30cts a cup? Employees at $300/mth for 6 days a week?
Can it be possible realistically, baring deflationary crisis?
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Uh....did he say inflation is theoretically (yes, you spelt it wrongly) possible?
He said that theoretically inflation is not irreversible, which is worlds apart in meaning.
HDB 3 rm at $15,000 in Redhill estate? Box on 4 wheels with safety features at $10,000? My favourite Kopi-O at ...er...em...30cts a cup? Employees at $300/mth for 6 days a week?
Hey, why not? The value of the $ is arbitrary anyway. It's realistic enough. You should be asking this from the purchasing power perspective of an individual and not the normative value of $$...
Ever heard of the hundred trillion dollar note? And that same currency gets you only 3 chicken eggs for one hundred billion dollars?
Admittedly extreme, but it demonstrates that the value attached to the $$ is arbitrary.
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Originally posted by xtreyier:
Hey, I applaud your efforts to make it simplier for others to understand. Let's hope our new generation of youths will be better informed, and that both our elected govt and society had contributed much to take care of the less priviledged.
I note that you wrote inflation IS THEORATICALLY possible? No sarcasm intended, or argument for pettiness sake, but only a quest for further insights. Do you also mean that inflation IS NOT REALISTICALLY possible?
Trust me, I would be the first to want reverse prices. Perhaps possible for other resources rich nation, but our no resource country where most of our goods and raw material are imported?
HDB 3 rm at $15,000 in Redhill estate? Box on 4 wheels with safety features at $10,000? My favourite Kopi-O at ...er...em...30cts a cup? Employees at $300/mth for 6 days a week?
Can it be possible realistically?
There are countries eg Brazil, Argentina, Zimbawee who encountered hyperinflation and hence the prices are very, very high.
As a result, the governments issue higher and higher denomination currency.
Theoretically, the governments can issue new currency in smaller denominations ie the government will replace 1 billion old Zimbawee note with 1000 new Zimbawee note.
So, the prices of all goods and services in Zimbawee will fall but might not be of equal percentage. Theoretically, the prices of the basket of goods and services can be back to the prices of 20 or 30 years ago.
However, it must be noted that the wages and wealth will also be reduced proportionately when the old currency is exchanged for the new currency ie the purchasing power of money is bascialy still the same as before the new currency is introduced.
So, theoretically it is possible to change back to the prices 20 or 30 years ago but no government will do so in practice. Indeed, it is meant to be an exercise question in economics textbooks to let the students know that inflation is not a problem if it is matched by an equal percentage increase in productivity ie a 5% infllation is matched by a 5% increase in money income for everyone.
Inflation is only a problem when it is not matched by an equal increase in purchasing power and the fact that inflation affects different groups of people differently and different sectors of the economy differently