The INFLATION thread

[tidus1203]

This inflation isnt caused by rapid economic growth.

If this inflation was caused by rapid economic growth, then the central bank can slow it down a bit by raising interest rates.

This inflation is caused by rising prices that have nothing to do with growth.

Our economy doesnt need slowing down. It's already slow.

If the central bank slows down our economy by raising interest rates, baka sa kangkongan pupulutin economy natin.

While that is true that our current inflation problems are not being caused by an overheating economy, they still have to raise interest rates to signal to the people that they are serious about inflation instead of just plain old verbal intervention. Raising interest rates should give that needed psychological effect to at least anchor INFLATION EXPECTATIONS. If businesses don't feel that inflation is well anchored then they will adjust prices rather quickly and that would pile up the inflation problems...

[uls]

Yep i understand...

Businesses will naturally raise the prices of their goods and services to keep up with rising cost and to maintain profit margins.

But if they raise their prices too high, they will price themselves out of business. People will stop buying from them.

There is a point of intersection where buyers are only willing to pay so high and sellers are only willing to sell so low.

The market should be able to sort itself out.

Central bank intervention (raising rates) could drive businesses out of business. People will lose jobs and the economy would be in worse shape.

------------------------

Medyo inflation dove ako e hehe

Tidus is our Charles Plosser. The Fed's inflation hawk

[tidus1203]

A few basis points wouldn't hurt... Maybe increase it by 25-50 basis points for now... Anyway for me if a business is over leveraged and they couldn't handle interest rate increases as part of normal economic cycle then so be it... Of course that is only my opinion, the politicians don't like that but that's why they are politicians and not economists. I am a hard blood capitalist and I believe its ok for businesses to fail if they couldn't protect themselves from the economic cycles... Well if you are not over leverqaged or better yet not dependent on credit (aka printing of new money out of thin air) then you should be okay...

[uls]

A few basis points wouldn't hurt... Maybe increase it by 25-50 basis points for now... Anyway for me if a business is over leveraged and they couldn't handle interest rate increases as part of normal economic cycle then so be it... Of course that is only my opinion, the politicians don't like that but that's why they are politicians and not economists. I am a hard blood capitalist and I believe its ok for businesses to fail if they couldn't protect themselves from the economic cycles... Well if you are not over leverqaged or better yet not dependent on credit (aka printing of new money out of thin air) then you should be okay...

good point Tidus.

[tidus1203]

http://newsinfo.inquirer.net/breakin...rise----report

Now even BEEF and PORK prices are going to go up....

[tidus1203]

http://www.gmanews.tv/story/98580/Ec...-raising-rates

Now the economists are encouraging the BSP to raise interest rates. Basta for me whatever happens; even if we fall into a recession we should never ever have a negative real interest rates. It makes money like toilet paper in that scenario, I don't care if companies who are over-leverage go bust but the integrity of our money must be upheld at all times... I am always for sound money!

[ringostarr]

http://www.gmanews.tv/story/98580/Ec...-raising-rates

Now the economists are encouraging the BSP to raise interest rates. Basta for me whatever happens; even if we fall into a recession we should never ever have a negative real interest rates. It makes money like toilet paper in that scenario, I don't care if companies who are over-leverage go bust but the integrity of our money must be upheld at all times... I am always for sound money!

para san ba yun interest rates? pag nangutang ka sa bangko o sa credit card

kanina ko pa pilit iniintindi eh

[uls]

Market sentiment has turned negative coz of inflation concerns
http://www.gmanews.tv/story/98862/RP...n-woes-persist

[tidus1203]

para san ba yun interest rates? pag nangutang ka sa bangko o sa credit card

kanina ko pa pilit iniintindi eh

INTEREST is the cost of money. So yeah whenever you use money (that i not yours) then you pay interest. If you let others use your money (lend it) then you get paid interest.

How does interest control inflation or how does it stimulate the economy you ask? Well let's first make things clear that the central bank can print as much money as it deems right (although I would add my opinion here that they are printing too much) and lend it out to bank and the banks to the consumer or businesses. If there is TOO MUCH MONEY chasing the same or worse lessening goods in the economy then prices rise. For example I have 5 loaves of bread and we have P10 in total money supply then the bread would cost P2. Now if I printed more money and made the supply at P20 then the bread will now cost P4 thus inflation. I know its a very simplistic example, but it works something like that. Now if they raise interest rates they slow down the printing of money cause less people will borrow because the cost is now higher. If interest rates are low more people would like to borrow (thus more money supply in the economy) because the cost of borrowing is lower. Tightening interest rates slows the economy since there is less money circulating around, loosening the interest rates though makes money very accessible and that stimulates business expansion thus the economy strengthens.

Mahirap ma-explain but I hope na-gets mo more or less...

Here is a video from the European Central Bank which should give beginners an idea how inflation and deflation is controlled via monetary policy...
[ame="http://www.youtube.com/watch?v=7sjQ7ly2NDU"]YouTube - European Central Bank Educational Video[/ame]

[CVT]

http://www.gmanews.tv/story/98580/Ec...-raising-rates

Now the economists are encouraging the BSP to raise interest rates. Basta for me whatever happens; even if we fall into a recession we should never ever have a negative real interest rates. It makes money like toilet paper in that scenario, I don't care if companies who are over-leverage go bust but the integrity of our money must be upheld at all times... I am always for sound money!

To have more money in their coffers? ..... Hmmmmm.....

They should encourage more money in the market (for spending) to stimulate the economy....

Again, since the world economy is oil-based, then the government should utilize their evat as the country's safety net by removing it from the root cause of all of these (price of oil and oil products).... Again, might not be enough but should help.... But then again, oil prices continue to soar.....

6110:pepsi: