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inflation
Inflation and price controls
If the gov't controls prices there will still be some inflation because some prices are beyond gov't control unless the gov't decides to subsidize the prices that they can not control (for example energy prices).
However inflation will not be as bad as it would if the gov't didn't control prices. The danger of this stategy comes when the gov't finally releases control (which it eventually must or it will go bancrupt). When the gov't ceases to control prices if economic conditions are not favorable, run-away inflation will occur.
If the gov't controls prices there will still be some inflation because some prices are beyond gov't control unless the gov't decides to subsidize the prices that they can not control (for example energy prices).
However inflation will not be as bad as it would if the gov't didn't control prices. The danger of this stategy comes when the gov't finally releases control (which it eventually must or it will go bancrupt). When the gov't ceases to control prices if economic conditions are not favorable, run-away inflation will occur.
Yo ma, is there anything in this whole world that you arent an expert on? Also don't you have a life other than this board? every time I log on you have the "Last Word"! rotflmao
Regards
Regards
definition of inflation
Take a basket of goods:
1) apple
2) milk
3) mattres
4) vacation
etc
Inflation is how much the price changes from one time period to another. Of course, you have to ask yourself many questions: should you take into account any material improvements that have beend made during that time period? For example, the top of the line DELL computer costs about the same every year: US$2500 or so. However, the performance continually increases. Would you say there is no inflation or defaltion in computer prices? Its up to those who define inflation.
However, If you just use , say a loaf of bread, then its easy. Its simply the change in price for the same exact loaf.
Government price controls just about the worst thing a government can do to its economy. There is NOTHING, I REPEAT, NOTHING good about it. It might have short term psychological effects, but in the long run it trashes the free market.
mondongo
Take a basket of goods:
1) apple
2) milk
3) mattres
4) vacation
etc
Inflation is how much the price changes from one time period to another. Of course, you have to ask yourself many questions: should you take into account any material improvements that have beend made during that time period? For example, the top of the line DELL computer costs about the same every year: US$2500 or so. However, the performance continually increases. Would you say there is no inflation or defaltion in computer prices? Its up to those who define inflation.
However, If you just use , say a loaf of bread, then its easy. Its simply the change in price for the same exact loaf.
Government price controls just about the worst thing a government can do to its economy. There is NOTHING, I REPEAT, NOTHING good about it. It might have short term psychological effects, but in the long run it trashes the free market.
mondongo
Jealous Jazz???
Canada had wage and price controls during a period of high inflation. I lived through it and kept my business running.....
so I know a little about it!
Can you say the same? Maybe by the time you get to be my age and are as educated and informed and infirm as I, you'll have the "last word " also.
Canada had wage and price controls during a period of high inflation. I lived through it and kept my business running.....
so I know a little about it!
Can you say the same? Maybe by the time you get to be my age and are as educated and informed and infirm as I, you'll have the "last word " also.
Inflation's Hidden Faces
Inflation has different faces:
When there are government price controls and the monetary supply increases, the demand for goods will increase and the supply will not (because the supply will not react to incentive implicit in the price rise) thus creating scarcity and unsatified demand willing to pay more; which is fertile ground for black markets.
So as you see, inflation can disguise itself as scarcity of goods or as a black market. These are only two of its possible and most visible disguises.
By the way, Inflation is properly defined as a sustained rising in prices, not just a raise in prices. This means that a simple price hike, say caused by a temporary phenomena such as a flood, drought, or a hike in oil prices implies an adjustment in the price level, not necesarrily inflation --- although many people (economists included) --- call it inflation. Inflation is properly when you have a sustained level of price increases, every month, every year, no matter at what level; and it is mostly due to a sustained expansion of the money supply in excess of the demand for money.
Inflation has different faces:
When there are government price controls and the monetary supply increases, the demand for goods will increase and the supply will not (because the supply will not react to incentive implicit in the price rise) thus creating scarcity and unsatified demand willing to pay more; which is fertile ground for black markets.
So as you see, inflation can disguise itself as scarcity of goods or as a black market. These are only two of its possible and most visible disguises.
By the way, Inflation is properly defined as a sustained rising in prices, not just a raise in prices. This means that a simple price hike, say caused by a temporary phenomena such as a flood, drought, or a hike in oil prices implies an adjustment in the price level, not necesarrily inflation --- although many people (economists included) --- call it inflation. Inflation is properly when you have a sustained level of price increases, every month, every year, no matter at what level; and it is mostly due to a sustained expansion of the money supply in excess of the demand for money.
thanks all
WELL THANKS ALL OF YOU FOR HELP ME OUT, I THINK I GET THE POINT.
AND MAYBE YOU CAN ANSWER THIS ONE:
HOW POSIBLE IS THAT DOMINICAN REPUBLIC GET'S TO WHERE ARGENTINA IS KNOW, WITH THE WAY THAT THE PRESIDENT IS DEALING?
I'M KIND OF WORRY.... SO PLEASE
WELL THANKS ALL OF YOU FOR HELP ME OUT, I THINK I GET THE POINT.
AND MAYBE YOU CAN ANSWER THIS ONE:
HOW POSIBLE IS THAT DOMINICAN REPUBLIC GET'S TO WHERE ARGENTINA IS KNOW, WITH THE WAY THAT THE PRESIDENT IS DEALING?
I'M KIND OF WORRY.... SO PLEASE
frederic
I agree that inflation is defined as a sustained increase in price level. My opinion is that a running average of the change in the price of a basket of goods is a good way to measure it. However, when most governments (USA) report inflation, they just use year/year or month/month price changes and call this "inflation". When I think of bad inflation, I think of an event (oil shocks and price controls in the USA in the early 70's as an example) or series of events that can propagate through out the entire economy. Basically causing a pricing upward spiral or "positive feedback mechanism".
let me know if any of this makes sense,
mondongo
I agree that inflation is defined as a sustained increase in price level. My opinion is that a running average of the change in the price of a basket of goods is a good way to measure it. However, when most governments (USA) report inflation, they just use year/year or month/month price changes and call this "inflation". When I think of bad inflation, I think of an event (oil shocks and price controls in the USA in the early 70's as an example) or series of events that can propagate through out the entire economy. Basically causing a pricing upward spiral or "positive feedback mechanism".
let me know if any of this makes sense,
mondongo
Inflation is a prolem many govenments try to stop. I rmeber a few years ago in the DR rice coffee beans milk and a few of the major comodities were acutally subsidized within the local market that as I remeber really drined and almost bankrupted the DR wow lime Agentina I hope not I wouldnt want those kinda problems on anyone
Also when price subsidies and controls were lifted I rember the peso JUMPED fro 1.00us --1.08rd to 1.00 us 1.25rd then 1.00us 8.00$rd and up from their.up and up ....
Free open market I think is better because the law of supply and demand rules and gives prices a realistic and intrisic value
Also when price subsidies and controls were lifted I rember the peso JUMPED fro 1.00us --1.08rd to 1.00 us 1.25rd then 1.00us 8.00$rd and up from their.up and up ....
Free open market I think is better because the law of supply and demand rules and gives prices a realistic and intrisic value
Re: frederic
Precisely the point, tou are right.
However remember that the main reasons oil prices rose in the 70's was because US had inflated its money supply to finance its government's deficits during the 60's, pushing an overvaluation of the USDollar to a level where Charles De Gaulle asked Nixon to exchange all the Dollars his treasury had for Gold at US$35 Dollars an Ounce.
Nixon, knowing he had more Dollars circulating than he could back with Gold had to devalue the Dollar with respect of Gold by de-linking the Dollar off the Gold Standard of US$35 and letting Gold prices, and later silver prices float to the highest levels ever to that date.
Later an because of that, the Arab Oil Countries decide they don't want devalued US$ Dollars for thier Oil and that they want to sell their Oil for the old price equivalent inGold and they raise their prices sky high in terms of Dollars, but at barely the same price in terms of gold.
So you see Inflation generated by oil prices was really generated by excessive monetary expnasion, to finance excesive expenditures by government...and the spiral stopped when the FED in the US stopped playing around with the money supply.
mondongo said:I agree that inflation is defined as a sustained increase in price level. My opinion is that a running average of the change in the price of a basket of goods is a good way to measure it. However, when most governments (USA) report inflation, they just use year/year or month/month price changes and call this "inflation". When I think of bad inflation, I think of an event (oil shocks and price controls in the USA in the early 70's as an example) or series of events that can propagate through out the entire economy. Basically causing a pricing upward spiral or "positive feedback mechanism".
let me know if any of this makes sense,
mondongo
Precisely the point, tou are right.
However remember that the main reasons oil prices rose in the 70's was because US had inflated its money supply to finance its government's deficits during the 60's, pushing an overvaluation of the USDollar to a level where Charles De Gaulle asked Nixon to exchange all the Dollars his treasury had for Gold at US$35 Dollars an Ounce.
Nixon, knowing he had more Dollars circulating than he could back with Gold had to devalue the Dollar with respect of Gold by de-linking the Dollar off the Gold Standard of US$35 and letting Gold prices, and later silver prices float to the highest levels ever to that date.
Later an because of that, the Arab Oil Countries decide they don't want devalued US$ Dollars for thier Oil and that they want to sell their Oil for the old price equivalent inGold and they raise their prices sky high in terms of Dollars, but at barely the same price in terms of gold.
So you see Inflation generated by oil prices was really generated by excessive monetary expnasion, to finance excesive expenditures by government...and the spiral stopped when the FED in the US stopped playing around with the money supply.
Re: frederic
When you have the inverse situation: A fall in production or a very slow growth in the production of goods and services in such a magnitude that there is an excess of money supply in relation to the products that can be bought with that money. In that case you will have a larger money supply than you need even though it is not growing fast. In that case you might have a slow or stagnated economy and inflation, a situation some economists call "stagflation"...
mondongo said:good post frederic, thanks for the historical information. Another question for you: under what conditions can you have inflation without large money supply growth? "stagflation"?
mondongo
When you have the inverse situation: A fall in production or a very slow growth in the production of goods and services in such a magnitude that there is an excess of money supply in relation to the products that can be bought with that money. In that case you will have a larger money supply than you need even though it is not growing fast. In that case you might have a slow or stagnated economy and inflation, a situation some economists call "stagflation"...