Inflation

[Vanathi]

Full formla irukeenga pola

 

[Agnii]

I don't get why production of goods/services is independent or even appear to be independent of money supply?

Govt. lends to industries, industries employ people, produces goods/services to meet the demand, people pay taxes to the govt. Govt in turn spends for development of the nation. It is a cycle, right? Money keeps flowing.

Even if you take govt/industries looting as a factor, it is always there. Just coz of this one factor, we cannot blame everything on govt, right?

Why inflation is good for the economy? It pushes consumer spending.

Take for example Home loans. The average age of home loan seekers has reduced in India compared to 20 years back. Back in 2000, it was not normal for a 22 year old to visit a bank for home loan. But now it is very common.

There are several factors to it. But, to me the major ones are

1. Fear of increasing prices of Flats/plots
2. Demand for the product

If I know the flat that cost 40 lakhs now gonna remain 40 lakhs even in 2033, will I rush to bank?

I will start RD for 120 months and make the bank to pay me for 10 years rather than taking a home loan and I pay the bank through EMI. And make a down payment of 40 lakhs and own the same flat comfortably. Here, what do the banks/govt earn?

You see it as the govt looting, while I see it as promoting the currency flow. Coz, as per the design, money has to flow.

 

[Balan72]

You see it as the govt looting, while I see it as promoting the currency flow. Coz, as per the design, money has to flow.

Sir, I ll write a detailed article for each of these created make believe confusions in economics and explain how it is not only wrong, but counter productive.

 

[Vanathi]

I don't get why production of goods/services is independent or even appear to be independent of money supply?

Govt. lends to industries, industries employ people, produces goods/services to meet the demand, people pay taxes to the govt. Govt in turn spends for development of the nation. It is a cycle, right? Money keeps flowing.

Even if you take govt/industries looting as a factor, it is always there. Just coz of this one factor, we cannot blame everything on govt, right?

Why inflation is good for the economy? It pushes consumer spending.

Take for example Home loans. The average age of home loan seekers has reduced in India compared to 20 years back. Back in 2000, it was not normal for a 22 year old to visit a bank for home loan. But now it is very common.

There are several factors to it. But, to me the major ones are

1. Fear of increasing prices of Flats/plots
2. Demand for the product

If I know the flat that cost 40 lakhs now gonna remain 40 lakhs even in 2033, will I rush to bank?

I will start RD for 120 months and make the bank to pay me for 10 years rather than taking a home loan and I pay the bank through EMI. And make a down payment of 40 lakhs and own the same flat comfortably. Here, what do the banks/govt earn?

You see it as the govt looting, while I see it as promoting the currency flow. Coz, as per the design, money has to flow.

mmm. valid point thaan. But coz of this fear of increasing prices, i will start buying the home whenever i am confident that I can pay that off. Then i go for a second one, third one etc. coz i dont want to miss out that opportunity. In this process, am i not buying more than necessary? its like snatching a house from a person who couldnt afford it, right? Meaning, I am increasing inequality among various income groups.

Had inflation not been there, there wont be much difference in prices and everyone can afford a house (according to their income levels). Are we not reinforcing socioeconomic disparities between low-income and high-income groups by creating such a false demand or hype? Money will flow no matter what coz there will always be a demand and supply in our ecosystem. Without inflation, wont our system be more self sustaining?

 

[Balan72]

Finally,

Are we not reinforcing socioeconomic disparities between low-income and high-income groups

Finally you could see.

 

[Agnii]

@Vanathi
Imagine a world where there is no inflation. Prices stay constant.

You are saying everyone can afford to buy. It would create a huge demand in the market. (What if 50 people commuting in a bus decide to buy car just because they can afford to buy)

So now, it creates a demand for labour. The thumb rule, when there is a demand, prices increase. In this case, labor will demand more salary. Plus they have to develop infrastructure, they borrow from bank and they have to pay interest.

How will industries pay this difference in salary and other expenditure without hiking the prices? They will suffocate and eventually run into losses before they shut down.

 

[Balan72]

@Vanathi
Imagine a world where there is no inflation. Prices stay constant.

You are saying everyone can afford to buy. It would create a huge demand in the market. (What if 50 people commuting in a bus decide to buy car just because they can afford to buy)

So now, it creates a demand for labour. The thumb rule, when there is a demand, prices increase. In this case, labor will demand more salary. Plus they have to develop infrastructure, they borrow from bank and they have to pay interest.

How will industries pay this difference in salary and other expenditure without hiking the prices? They will suffocate and eventually run into losses before they shut down.

No Sir, none of this will happen. The prices of low inflation economies like Singapore are almost same for 20 years. Nothing like this happened there.

It’s a fictional lie they have created. You know how much interest they pay in Singapore? 0.20 percent, that is like 20 paise per 100 rupees. So much low is their inflation.

The first myth we need to come out from is this growth story. That’s fake. We can consider ourselves as grown if only all of us have wealth.not a few.

முழு உடம்பும் வளர்ந்தால் அதற்கு பெயர் வளர்ச்சி. தலை மட்டுமோ கை மட்டுமோ வயிறு மட்டுமோ பெரிதானால் அது வீக்கம். பெரு நோய். அது தான் நடக்கும் அச்சடித்து செலவு செய்தால்.

 

[Vanathi]

@Vanathi
Imagine a world where there is no inflation. Prices stay constant.

You are saying everyone can afford to buy. It would create a huge demand in the market. (What if 50 people commuting in a bus decide to buy car just because they can afford to buy)

So now, it creates a demand for labour. The thumb rule, when there is a demand, prices increase. In this case, labor will demand more salary. Plus they have to develop infrastructure, they borrow from bank and they have to pay interest.

How will industries pay this difference in salary and other expenditure without hiking the prices? They will suffocate and eventually run into losses before they shut down.

Demand for car increases -> Labour cost increases -> Car price increases -> demand for car decreases
The same holds good for any kind of supply and demand.
In case of inflation, car price keeps on increasing coz of influx of printed notes which isnt serving any real purpose.

Not everyone's purchasing power is equal. It depends on their income. Though there will be shortages and surpluses in between, IMHO equilibrium will be maintained at the end.

 

[MASK]

Unmai thaan inflation is good for banks, apo thaane interest rates jaasthi panalaam

Romba naala kanomey ivangalai??

 

[Agnii]

No Sir, none of this will happen. The prices of low inflation economies like Singapore are almost same for 20 years. Nothing like this happened there.

It’s a fictional lie they have created. You know how much interest they pay in Singapore? 0.20 percent, that is like 20 paise per 100 rupees. So much low is their inflation.

The first myth we need to come out from is this growth story. That’s fake. We can consider ourselves as grown if only all of us have wealth.not a few.

முழு உடம்பும் வளர்ந்தால் அதற்கு பெயர் வளர்ச்சி. தலை மட்டுமோ கை மட்டுமோ வயிறு மட்டுமோ பெரிதானால் அது வீக்கம். பெரு நோய். அது தான் நடக்கும் அச்சடித்து செலவு செய்தால்.

How can we compare Singapore with India? Oru Tamil movie la solvaanga, India va vida miga miga siriya naadu dhan Singapore , avangaley ivlo super ah develop aagitangaley nu... isn't it the main reason why we can't compare these 2 nations?

India is the most diversified country in the world... That too with humongous population

Orey country ulla evlo languages, evlo religions, evlo differences... Inga oru bill pass panna avlo sulabama? Coz they have to consider the impact it would make on this large and diversified population...

I'm not supporting govt or the policymakers... I do agree with you corruption is rampant in India... And yes, Inga holistic growth story kedaiyaadhu... Edhachum few sectors dhan grow aagum, like IT in South India. Also inflation vandhu indha sectors ah periya alavula baadhikaradhu illa, that is also true. Ivlo challenges irundhalum kuda, India is one of the growing economies in the world. Singapore kuda kandippa India va compare panna mudiyadhu. At the same time we cannot deny that India is doing well constantly despite of the challenges posed due to diversification

@Vanathi and @sita estimates cannot be so accurate while printing money. Excess currency ya vida, shortage of currency dhan more chaos create pannum. Yen na Indian population andha madiri. Inga demand koranjudhuna, adhigama suffer aagradhu unorganised sector dhan

Also, traditionally India has been a savings driven economy. Inga vandhu, currency demand korainjadhuna, consumer spending innum kammi dhane aagum?

 

[Vanathi]

How can we compare Singapore with India? Oru Tamil movie la solvaanga, India va vida miga miga siriya naadu dhan Singapore , avangaley ivlo super ah develop aagitangaley nu... isn't it the main reason why we can't compare these 2 nations?

India is the most diversified country in the world... That too with humongous population

Orey country ulla evlo languages, evlo religions, evlo differences... Inga oru bill pass panna avlo sulabama? Coz they have to consider the impact it would make on this large and diversified population...

I'm not supporting govt or the policymakers... I do agree with you corruption is rampant in India... And yes, Inga holistic growth story kedaiyaadhu... Edhachum few sectors dhan grow aagum, like IT in South India. Also inflation vandhu indha sectors ah periya alavula baadhikaradhu illa, that is also true. Ivlo challenges irundhalum kuda, India is one of the growing economies in the world. Singapore kuda kandippa India va compare panna mudiyadhu. At the same time we cannot deny that India is doing well constantly despite of the challenges posed due to diversification

@Vanathi and @sita estimates cannot be so accurate while printing money. Excess currency ya vida, shortage of currency dhan more chaos create pannum. Yen na Indian population andha madiri. Inga demand koranjudhuna, adhigama suffer aagradhu unorganised sector dhan

Also, traditionally India has been a savings driven economy. Inga vandhu, currency demand korainjadhuna, consumer spending innum kammi dhane aagum?

I appreciate your emotional speech.. but keeping them aside, just think why we are a savings driven economy unlike other developed countries.. why its imprinted in our minds that we have to keep saving instead of spending?? Answer is inflation

 

[Agnii]

I appreciate your emotional speech.. but keeping them aside, just think why we are a savings driven economy unlike other developed countries.. why its imprinted in our minds that we have to keep saving instead of spending?? Answer is inflation

Emotional ah va irundhuchu.. lol

Sari... By savings, if you mean that saving in Bank deposits, then your statement doesn't hold true... Coz, Savings can't beat inflation...

If you mean to say investing in land, gold, stocks, MFs , adhu ellam consumer spending la vandrum... And money circulation irukkum...

 

[Vanathi]

Emotional ah va irundhuchu.. lol

Sari... By savings, if you mean that saving in Bank deposits, then your statement doesn't hold true... Coz, Savings can't beat inflation...

If you mean to say investing in land, gold, stocks, MFs , adhu ellam consumer spending la vandrum... And money circulation irukkum...

First oru disclaimer pottudren. Neither have i read economy as a subject nor have i shown any interest in knowing that till date. So, I may be completely wrong and I am just curious to know why inflation can be good for any country.

By savings, i meant our hoarding culture.. We are made to behave that way coz of inflationnu solla varen. Saving is important but hoarding is not. This creates a big gap between higher income and lower income group in the long run coz the rich gets richer and poor get poorer in this kind of an ecosystem.

Money circulation will be there but its rate of flow and impact on economy is importantla. Money which is in the hands of you and I is not the same as the one with an industrialist.

 

[Agnii]

First oru disclaimer pottudren. Neither have i read economy as a subject nor have i shown any interest in knowing that till date. So, I may be completely wrong and I am just curious to know why inflation can be good for any country.

By savings, i meant our hoarding culture.. We are made to behave that way coz of inflationnu solla varen. Saving is important but hoarding is not. This creates a big gap between higher income and lower income group in the long run coz the rich gets richer and poor get poorer in this kind of an ecosystem.

Money circulation will be there but its rate of flow and impact on economy is importantla. Money which is in the hands of you and I is not the same as the one with an industrialist.

Naanum oru disclaimer pottudren... Mba appo enakku microeconomics and macroeconomics ellam thalai suthhum... Avlo vague...
Second year la oru Bengali ma'am kaga mattumey, econometrics nu oru elective eduthhen andha trimester fulla olunga padikkama, en friend prithvi punniyathula andha exam la pass aana kadhai indha forum la kuda share panirken lol...

So naan solla varuvadhu ennavendraal... Enakkum economics la knowledge ellam kedaiyaadhu... Edho araiyum koraiyuma enaku therinjadhu vechu points podren... and yes, I'm also curious to know more on this topic

 

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Hereafter expecting all comments in this thread will start by DISCLAIMER!!

 

[Vanathi]

Naanum oru disclaimer pottudren... Mba appo enakku microeconomics and macroeconomics ellam thalai suthhum... Avlo vague...
Second year la oru Bengali ma'am kaga mattumey, econometrics nu oru elective eduthhen andha trimester fulla olunga padikkama, en friend prithvi punniyathula andha exam la pass aana kadhai indha forum la kuda share panirken lol...

So naan solla varuvadhu ennavendraal... Enakkum economics la knowledge ellam kedaiyaadhu... Edho araiyum koraiyuma enaku therinjadhu vechu points podren... and yes, I'm also curious to know more on this topic

lol ok. Naan enga thala balan varra varaikkum wait panren. Avar vandhu naalu shit moonu dumb rendu loosu oru fraud pottu explain pannuna thaan enakku thrupthiya irukkum

 

[Agnii]

lol ok. Naan enga thala balan varra varaikkum wait panren. Avar vandhu naalu shit moonu dumb rendu loosu oru fraud pottu explain pannuna thaan enakku thrupthiya irukkum

Sari avar vara varaikkum, savings and hoarding pathi namma jolly ya pesittu iruppom

Unnoda opinion, savings is important, hoarding is not... Right ? At the same time u said that by savings, you mean our hoarding culture.

So, savings na bank or PO la deposit pandradhu... Hoarding na, Kitchen shelf la irukka paathirathula husband ku theriyama olichu vaikradhu... Correct ah

 

[Nilaa]

Hoarding na, Kitchen shelf la irukka paathirathula husband ku theriyama olichu vaikradhu... Correct ah

அப்டியா அர்த்தம் பணத்தை பதுக்கறது இல்லையா!!! black money இல்லையா white money savings ah

 

[Vanathi]

Sari avar vara varaikkum, savings and hoarding pathi namma jolly ya pesittu iruppom

Unnoda opinion, savings is important, hoarding is not... Right ? At the same time u said that by savings, you mean our hoarding culture.

So, savings na bank or PO la deposit pandradhu... Hoarding na, Kitchen shelf la irukka paathirathula husband ku theriyama olichu vaikradhu... Correct ah

Saving is having 2,3 set of socks for backup. Hoarding is having a full cupboard of mismatched socks in the hope that we will find its match one day lol.. Saving is a result of a good planning whereas hoarding is a result of insecurity and panic. This insecurity is caused by the uncertainty which is created by inflation (atleast in my opinion).

 

[Agnii]

அப்டியா அர்த்தம் பணத்தை பதுக்கறது இல்லையா!!! black money இல்லையா white money savings ah

Sambadaa la pottu moodi vaikkradhum padhukkaradhu dhane