Inflation – causes and examples from the global economy.

Here is an excellent video from CNBC which includes news clips from the 1970’s and beyond. Below are some of the main points:

  • 1960 – pint of milk in the UK 3p. Today 50p
  • Cost Push Inflation – today: supply-chain bottlenecks, shipping costs rising, labour shortages
  • Demand Pull Inflation – usually associated with an economy operating near full capacity
  • Milton Friedman – inflation a monetary phenomenon and the domain central banks.
  • With the expansion of money why has there been little inflation recently? Velocity of circulation is not evident – i.e. number transactions.
  • CPI – Headline Inflation but Core Inflation is more valuables it takes out volatile components of the CPI which have no reflection on the strength of their economy – e.g. oil. Gives you a better idea of the inflation trend.
  • A little bit of inflation is good – ‘Goldilocks’ not too hot but not too cold.
  • Hyperinflation – Brazil – 1980-1995. Weimar Republic – issues 100 Trillion D Mark note.
  • !970’s – Stagflation – wage price spiral – higher interest rates 20% – trade-off was the higher unemployment rate.
  • Central Banks – focus on inflation but also avoid a deflationary environment.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s