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