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Showing posts with the label inflation

20130927: inflation vs deflation

I am a very simple fellow with a very simple mind and thinking. I don't know much about economics, global economics and macro economics. To my very simplistic understanding, inflation is because of 2 things 1. Visible inflation: increasing prices of almost everything constantly. In India, the published inflation is ~ 7%. It is usually because of supply and demand imbalance. (Growing demand for everything and lesser supply of things). 2. Invisible inflation: as the name suggests, we can't easily perceive it. I generally think it is around 4-5% in India. It is caused not because of increasing prices but because of reducing value of the money we have. It is usually called reduction in purchasing power. It is caused by infusion of new money in the economy because of the need for it by banks, by governments etc. If there is more money available then it goes without saying that the value of the money you are holding goes down. Put together I think the real inflation in India is aroun

20221129 : inflation

I keep hearing the word "inflation" a hundred times everyday..  what is it? A meal has the same value it did last year, as now, as next year. A meal is an example, but everything in the world I think - nothing changes in value. Yes it costed less last year, costing something now and very very likely it will cost more next year. What is really happening is that the meal is not changing value (and becoming expensive), instead money is losing value and a meal is becoming expensive... The truth is the value of goods change. But I feel the intrinsic change of value is very minimal compared to increase in value because of price increase due to drop in money value. I know - there are probably tons and tons written about this and millions of books, but "inflation" is something I struggle to get my head around. Why do we have inflation? Why is money losing value? I am not very sure about this, but feel the main reason is because we have printed so much of it. I mean - anybod