"Inflation is good for the economy" theory: pure bollocks I say!

[bic_cherry]

"Inflation is good for the economy" theory: pure bollocks I say!

I think that inflation (the increasing price of a fixed basket of goods) represents either government corruption or some corrupt leak in the economic bucket whereby due to additional costs (e.g. Increased Corruption/ increase political salaries/ business monopoly/ currency depreciation due to print $$$/ waste/ high debt demanding current payment/ acute shortage due to natural calamity/ excessive demand due to over consumption/ population etc).

If the volume/ quality of the basket of goods isn't substantially improved (no visible increase in quality of life) then there ought to be depreciation in the price of the said goods due to improve mechanization and thus productivity- e.g. A cotton tee shirt costing $3 in 1981 ought to still cost $3 or even less because as people have become smarter there are more types of T shirt available (nylon, polyester mix etc) and new T shirts if better made, ought to last longer, and as the world develops, more countries make T shirts resulting using BETTER MACHINES in more competition by T shirt manufacturers for business- so the price of the T shirt in an improving economy should actually DECREASE as productivity efficiency INCREASES- thus, a 1981 quality T shirt OUGHT TO COST LESS TODAY THAN IT DID IN 1981 if indeed humanity was progressing- yet this is evidently NOT THE CASE...

That's why I say that the Abenomics theory that (~2%) "inflation is good for the economy" is simply bollocks. Maybe to increase GDP (or pump up the ¥ value of company revenue/ property) it is good (inflates nominal GDP to a juicer number) however, if it's the people's quality of life/ technology improvement we are talking about, than I feel that inflation in price for a not substantially improved/ modernized product (high property prices will just create a 2speed society and thus more civil unrest/ disenfranchised younger generation, currency depreciation will just make retires and the poor even poorer and make neighboring countries hate U more...) - that is just a scam perpetuated by politicians and the economist on their government payroll...

Tag:
Inflation, corruption, productivity, Singapore, GDP, Budget, deficit, bollocks, bogus, poverty, money, hyperinflation, debt, crisis, Abenomics,

Related thread noted:
Although photo shown is about using inflation to stimulate spend and investment (albeit n a forced and unnatural way).
Why some inflation is good for the economy!

 

[bic_cherry]

Related topic/ thread:

Governments as small minded as the people are...

Thread source: "Inflation is good for the economy" theory: bollocks I say!
Some "mild" inflation is good for the economy... as long as it is not hyperinflation...

According to the appended textbook excerpt (image), it's only economic use is to firstly, not disappoint unproductive workers by allowing them no decrease in nominal salary, but secondarily, to force people to spend or invest $$$, all this I feel only serves to artificially boost GDP but in a stupid way just as steroids boost the short term performance of an athlete but has many dire long term consequences besides constituting a doping crime which is a VERY SERIOUS OFFENSE IN THE SPORTS SCENE...

Firstly, not lowing the salary/ earnings of stupid/ lazy/ unproductive workers gives them the FALSE impression that all is fine and dandy- so the lack of productivity continues and these workers over time will become more lazy, and more dependent on the government for handouts and freebies since in the first place, the govt has Molly coddled (deceived) them (through quantitative easing/ loose monetary policies) into thinking that they are productive members of society when actually they are nothing but.

Secondarily, forcing people through inflation or the threat of such is ought to make people spend money unwisely, either through buying useless items that are ultimately just thrown away or else in investing in unwise investment schemes in which only investment bankers benefit, or else hyper-inflate the property bubble- the consequence of all his is a divided 2 speed society of haves and have nots wherein there can be expected to be increased social discord as the poor forever demand handouts from a government overconfident in its own self: the cause of inflation and as such, the one now responsible for bringing the poor up... Isn't it all a wayang show then? Even the rich demand handouts since they become used to property investment- not the real investment kind, but the rent seeking kind whereby they try to live of rent from tenants/ remain in their big houses since everyone begins over leveraged with the expectation of inflation eroding one's finance (and expecting inflation to make them even more rich)- these rich people (like the asset rich Joo Chiat residents(see report)), are ought to refuse to downgrade simply because they have (i) no idea how to invest the $$$ proceeds against inflation, (ii), ought to refuse to downgrade for the first reason and instead depend on the government for inflation proof handouts (handouts and free gifts)- these all cause a big problem for the government since the dependence on it for handouts has now exponentially increased (people also expect governments to do more since inflation will cause a nation's foreign currency reserves to also increase (to balance home country money supply increase) ...

As I have long said, common sense dictates that for a common object/ commodity, it's purchase price ought to fall over time with better production methodology, improved productivity and increased human cooperation towards such production (better roads/ transportation etc). But where the expectation of a common sense outcome does not prevail, then the people become a very confused lot- more and more dependent on the government for handouts- a syndrome in the first place caused by false/ myopic economic thought that "inflation is good".

Society becomes depressed as people see little future in becoming independent in retirement as their savings are constantly deflated (eroded) by inflation. There ins little trust amongst people in the midst of this anxiety and even lesser trust in the government so society continues fragmented, why then do economist think in this very myopic and destructive way? Perhaps the answer is found in who lines their pockets... sad to say, it is the tax payers moneys as the people cannot see any further than their own daily affairs...

In a state where fire is destroying the building (high unemployment/ poverty), switching on the sprinklers (inflation) might save something. But having the sprinklers on indefinitely cannot be productive, perhaps what is necessary is to change the management of the building (confiscate land/ freehold property as PAP in 1960s till 1980s to build HDB- that will really give new/ younger citizens a moral boost- inflation in the cost of keeping property for the rich (high taxes/ inheritance taxes etc), deflation in price of necessities for the poor (more accessible education and healthcare for the poor)- that will be a real socialist government, which the current PAP claims to be- but to the extent of lip service only...

So whilst hyperinflation will kill a country almost immediately, inflation will kill it slowly- it is thus not a poison to be trifled with given the many social problems it will attract down the road. Politicians are not academics and these corrupt economists ought not be paid. Too bad, we live in an imperfect world, still, there is a limit to pretend and make believe...

(image source)

(image source)

 

[bic_cherry]

Fiat currency-base inflation is like steroids, use at your own risk..

One more post, written another way...

Fiat currency-base inflation is like steroids, use at your own risk...

Thread source: "Inflation is good for the economy" theory: pure bollocks I say!
This author is as crap as the book he wrote. Without inflation, there is no requirement why your salary needs adjustments because you are doing the same thing again over the years, yet whatever you are doing might be replaced by a machine who does more (24/7) and less (initial investments and maintenance costs). Inflation existed to ensure sustainability of life forms, economic and standards of life improvements. Think about an economy that never has near full employment or inflation. Where is the demand for services? Why would you get pay raise? Productivity is not required in the first place. Sufficient inflation motivates the country to improves, mismanagement of economic development and poor policies resulted to hyperflation. Hence inflation by itself is not bullshit, it is the people who uses it.

Hi Kim, I have not written a book, at least not yet...

"Inflation existed to ensure sustainability of life forms, economic and standards of life improvements"- a whole load of bull ¢rap: pls check out the rate of inflation in America when it was still on the gold standard (before 1930s)... It was practically flat for centuries even peri-independence (chart below).

Productivity is needed if U want an increased quality of life than would otherwise be had U just carried on without any increase in productivity. If U depend on inflation for a salary increase, than sorry, U are just deceiving yourself whatever much more that U earn is just eroded by inflation- there is no real increase other than the numbers on your pay slip- and I dare say that even if your present life seemed better (pay slip numbers cheer) I dare say that, ceteris paribus, your future will be more condemned than it had inflation not occurred: asset rich-cash poor problems anyone?

As mentioned, inflation like steroids is not bad per se since it does give short term GDP/ employment gains, and allows a government to clear it's national debt faster- just that those who utilize this form of performance boost ought not expect too much from the future: future side-effects WILL occur e.g.: asset-rich, cash poor/ asset poor and cash-poor structural problems, widened rich-poor gap between property owners and renters: social unrest, people perpetually dependent on government since they are spendthrift (encouraged to spend on rubbish due to inflation), bankers who cheat/ easily entice people to invest in rubbish just by frightening them about inflation, high present/ future healthcare costs due to the stress caused by inflation and the impossibility of retiring since savings (sans inflation proof investments) will never be enough, high unemployment eventually as the economy stagnates on UN-productivity since workers were previously rewarded for tight labour market, NOT productivity, pollution problem as poorly monitored/ developed industries are pushed out, inability to cope with natural disaster/ civil unrest since inflation erodes the trust of people in the government etc etc.

As mentioned, money is just a convenient and fungible substitute to be used in barter (long ago people used silver and gold), only since the end of the gold standard did inflation raise its ugly head.

U are either a property investor or a person in debt. Real people of integrity are not fooled by debt laden governments about the need for inflation. People who owe others money always hope for high inflation in the hope that inflation will diminish the pain of repaying debt. Society will never be at peace when there is a persistently large population of people (/nations) owing too much- maybe the poor need to have their COST to access essential necessities deflated (healthcare/ education etc), but otherwise just fiat currency-base inflation does nothing to benefit society- but to fragment it whilst increasing GDP with no significant long term benefits- nothing at all...

(image source)

 

[bic_cherry]

Corruption can really cure corruption, until something more drastic happens of course

Corruption can really cure corruption, until something more drastic happens of course...

Thread source (HZW): "Inflation is good for the economy" theory: pure bollocks I say!
do we even use inflation as an economic tool?
I understand that MAS has been keeping the exchange rate higher just to reduce the impact inflation is having on cost of living in SG.
imagine if our SGD is like MYR... woooooo PAP sure toh one

Keeping the SGD up against "basket of currencies" does not mean they stop printing SGD. It just means that they print relatively less than the rest.

So PAP is still a sinner too, just less than say PM Abe (Japan) whom I don't think will survive long as despite devaluing the Yen (brings hardship to pensioners/elderly and increases property prices aka cost of living and inflation for all), little in terms of structural change has occurred (better education, healthier population to reduce healthcare costs/ dependence etc).. His prospects for election after the steroids of QE have worn off or when the pain of inflation from all his 'stimulus' catches up will be as good as his success in structural reform, which I estimate is toast (just as none sufficient is seen yet)- he has only made MNCs and shareholders temporarily rich...

not totally wrong
in theory (actually more like in risk of being labelled as currency manipulator), MAS can make inflation even lower by targeting a certain exchange rate point.
That would however eat into the profits of MNCs and local firms way too much as most firms with business outside of SG conduct them using USD.
it would be way worse if MAS resort to printing money to fight inflation...

"it would be way worse if MAS resort to printing money to fight inflation."
Wha, this is going into abstract thought already, cos by convention, quantitative easing, aka loose $ policy, aka print money, aka currency depreciation are ALL INFLATIONARY, since they all deflate the worth of the dollar (pay more to buy less).

Unless U of course mean fighting inflation selectively like Zimbabwean leader Roberto Mugabe did: by printing money to spend himself such that the end result was that cost to the Mugabe family deflated/ decreased (free fresh printed money), but cost to Zimbabwean citizens increased (hyperinflation meant that the price of say eggs could really increase in the same day/ overnight..)
So for a dictator, he can deflate the impact of inflation on a select group (just give them weapons/ printed$$$) but at the expense of another group. Maybe PAP will send a study group to Zimbabwe to understand how Mugabe remains in power despite the onslaught of hyperinflation circa 2009 in his country. How he survived politically (he ended up having to share power), I dunno, but as they say, in the wilderness of Africa, behind the bush scrub, anything can happen...

Zimbabwean kid finding the amount of $$$ that Mugabe printed quite amusing...

(image source)

 

[bic_cherry]

Inflation: in fiat currency base (erosion in value) for sure..

Inflation: in fiat currency base (erosion in value) for sure...

Thread source(HWZ): "Inflation is good for the economy" theory: bollocks I say!
Inflation is a tool to moderate the market, and also a by product of the economy. Remember, you have to pace the Singapore economy against global market too.
Imagine an island of just 2 people.
One will harvest coconuts and one is harvesting apples.
Everyday, they just trade each other one coconut for 2 apples. This is what happened without inflation or deflation, everything will just remain stagnant.

Oversimplicification fallacy: what I am talking about here (and the whole world presently) is inflation as cost of goods in fiat currency. If one were to use say gold coins as proxy, then inflation would be perhaps zero or even negative depending on the proxy value used- e.g. if an average compact car cost 10 oz of gold in 1930s (gold price was ~USD23/oz, of still cost 10oz to buy the same, albeit slightly modernised compact car (taxes not inclusive) (gold today is trading ~USD 1253/oz)- thus in gold terms, the value of the car HAS NOT been inflated, however, in dollar terms, the factory price of the same car type has risen from say US$230 to a whopping USD12,530 over the last ~80years. Actually, it was the value of fiat currency (USD) that depreciated.

So in the balance of things, when something appreciates in dollar value today, it is often because the number of dollars in circulation has increased, diluting the dollar value. Between desirable goods however, with the exception of natural calamity (storms/ famine causing seasonal shortage of food etc)/ bubble economics (hello kitty mania)/ change in taste (Fukushima radiation risk- sea food prices plummet), there is little change on the barter value between commodities.

As mentioned, prior to fiat currency introduction (1930s= partial; 1972= total), inflation under the gold standard of money exchange was practically NON-EXISTANT.

USA inflation: 1665 to 2005:

(image source)

SGD quantity inflation (printing) as a proxy to USD quantity inflation, just to keep exchange rates stable...

(Image source)

And yes, if coconuts and apples were as desirable and as rare as they were (in your e.g.) before, the one fresh coconut will still yield 2 apples, now as it did then, its price in fiat currency regardless...