The INFLATION thread

[tidus1203]

Stimulation is ok as long as its is necessary, we don't need extra stimulation as of now too much stimulation destroys the value of the currency and promotes consumption over savings and investment...

[tidus1203]

http://business.inquirer.net/money/t...5-basis-points

BSP raises cash rate by 25 basis points. Kulang IMO dapat 50 basis point na kaagad. At this time where inflation is front and center (growth takes the back seat since we are not even remotely close of being in a recession) we need a strong currency...

[webmiester]

I hope hindi tayo umabot sa point ng great depression ng 1920's sa states, wherein the cost to transport goods were so high that no one could afford the goods. kaya the meat nd all from the provinces werent being delivered na lang to the city and food became very scarce.

in our case, fishermen in gen santos can no longer fish for long hours because of the price of fuel. So they might fish na lang for 4 hours instead of 8... resulting in lesser fish...

Pork is projected to go up to P220/kilo in luzon. But because traders know that no one can afford P220/kilo they will not raise it to that level... which leads me to think that they might actually simply stop selling pork... just like what happened during the great depression.

[pup2]

Depressing ain't it? That things have gotten so desperate so quickly, All of a sudden parang gusto bumalik ang mundo sa subsistence farming -- eh kulang na ang lupa. Ano kaya ang maasahan ng susunod na henerasyon?

[tidus1203]

Kaya nga eh INFLATION is very very destructive, Even more destructive than economic slowdowns that these clowns from the US Federal Reserve keep on pumping money at a time where inflation is a big risk...

But I don't really see a great depression like of the 1930's. I instead see a 1970's like stagflation as more likely....

[ringostarr]

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...
YouTube - European Central Bank Educational Video

ok thanks for the very informative answer.

here's a thought though

do you think the possible case scenario now is we have too much money not being used and therefore prices are going up

too few people controlling and holding the larger piece of the pie that is the actual available money. they raise prices in their businesses even more bec. they can survive with higher prices and lower volume of sales

hmmm.... maybe that's why oil and food crises are happening right now -> to pressure the "hoarders" of money to make their money flow around again bec. if they let it sleep on their perceived investment securities, only time will tell when the effects of oil and food consumption eat up to their precious investments.

if I am businessman Starbucks for example, and I raise the venti glass to P30 more to P190/glass. it's ok if I lose a few more customers bec. i still have a lot of reserve money from previous earnings and are invested on securities.
yes I still get the margin in my stores bec. the few customers who buy the 190 can still make more money for me.

on the other hand, however, if a certain unforeseen force pops up in the horizon like the rising oil and food prices, it may have little effect on me for the meantime but it will have gradual effect on my employees, on my daily operation, on my dealers/suppliers prices, on my sales projection for next months and everything else necessary to run my businesses. ika nga parang domino na isaisahin ang bagay bagay na once I thought were as safe as a wall

i can do 2 things. dont cave in and raise my prices even more, say a venti glass at P220 and perhaps I still make more money. or do the opposite honorable way and let money flow again with affordable starbucks prices

so the question is how long can I not cave in?

so that's where the pressure of raising and lowering interest rates come in. why not lower the interest rate even more so that new players can borrow more money and grab the opportunity from the bigtime hoarders. puwede ba yun?

[tidus1203]

Yes I always believed that there is too much money thats why prices are going up because those money has to go somewhere... And that is the sad part its the rich who gets to use the newly printed money first. The banking elites, the business elites, the investment elites these are the people who use the the hot of the printing presses "money"... By tyhe time it trickles down to the poor inflation has already taken place and those new money is now worth less...

[aku]

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

More money in the market may help for a short while, but once the market forces get to work, that additional money will be worth less and less, and we're back to where we started (in real terms) but with higher prices (nominally). As I understand, this is a major contributor to inflation.

[CVT]

^^^ Yes, bro.,- that is why there's a at the end of the statement.... Real balancing act by the central bank to control this....

6110:pepsi:

[CVT]

^^^ Yes, bro.,- that is why there's a at the end of the statement.... Real balancing act by the central bank to control this....

6110:pepsi: