Joined: 29 October 2005
Joined: 15 August 2005
Joined: 05 October 2007
It feels so nice that I can express my views somewhere, because on my own thread I just stick to the facts and let others vent.
Way back in december when the subject first popped up after almost 30 years, my theory was to do with the interest rates. A prediction of worldwide recession happened and interest rates were brought down all around the world. I questioned that and said there's inflation too, and the baloon will pop. Inflation will skyrocket, and the threat of recession will loom every quarter.
A recession happens when there are 2 successive quarters of negative growth. It is feared a lot more than inflation since it is a lot harder to control, and has not been declared so far.
There are way too many factors that have contributed to inflation. India is an economy that counts food costs and oil while calculating the inflation figure. That does not happen in all nations.
In december, it was predicted that the economy will grow at a reduced rate of around 7%, the last 3 years it was 9. Actual growth is if the inflation figure is reduced from that. An acceptable rate is 5.5% per the govt.
Govt. or it's policies are not responsible for inflation. All the taxes and subsidies on oil do not reflect it's actual price in India or China. Raj had a finger on the dollor. Yes, it's weakness has contributed to a lot of problems. A weak wall street does contribute to the falling dollor. Ektas said it very well. Rise in consumption spending is the best way to reduce the chances of a recession. Dakoo said it very well too. The price of oil uses the base price of the dollor in the 80's. In August of '07 the mideast countries decided to dump supporting the dollor and bring the price of oil to it's current value. And no Ananya, the problem will not be solved soon. The market does not correct itself so fast. Although I agree with you that there is only one way for inflation to go away, and that is for the market to display the correct numbers.
Joined: 16 March 2007
Nina. LMAO. Just finished with Economics for the year, and you had to bring back the memories. (Tutor2u is an amazing website for any Economists in the making though btw )
It's all down to basic demand and supply. Demand from booming economies eg China and India is increasing, world supply is falling short, this bids prices up. The government hasn't caused this, (inflation is rising all over the world, the UK's price level rose to 3.1% this week too) but yes they are responsible for keeping it low and stable and that's what they have to work on now. Tightening the monetary policy, dampening consumer demand would work as a temporary solution, but to tackle this in the long run, aggregate supply has to rise - implementation of supply side policies. Better education, training, tackling unemployment, increasing incentive to work, promoting competition and efficiency in product markets. (Atleast I think so)
Edit: Also in the UK, the monetary policy commitee have reluctantly had to cut interest rates despite inflationary pressures due to dampened consumer confidence caused by the credit crunch and recession worries, further increasing inflation. I see this has maybe a long term measure to ensure economic growth, and inflation can perhaps be seen as a short term cost?! Hmmm.
Joined: 05 October 2007
Joined: 27 May 2008
Joined: 17 January 2008
Joined: 27 May 2008
I Disagree with you. mainly because oil prices cannot change the price we pay for vegetables. oil just increases petrol costs, not inflation.
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