does any one know the inflation rates from november 2005 in the uk?
The current inflation rate in the UK is 4.75%. This has remained fairly constant for the last couple of years. However there was a 0.25% rise in August 2006. From August 2005 the inflation base rate was 4.50%.
Try the website below for some more information.
Hope this helps.
http://inflationdata.com/Inflation/Infla...
Try this it looks like its got them all
i need monthly inflation rates for britain, japan and the usa in the last 5 years.
I also need Europe inflation rates, although every country there has its own inflation, is there an index that gives the average monthly inflation in europe???
thanks alot for the reference!!
The information asked for is available in the source shown.
VR
Why the inflation rates world wide became lower in the 2000%26#039;s?
Please give me a few reasons.
I think this started already in the 1990s when central banks became more independent of governments and began adopting formal, public inflation targets with the goal of making the process of monetary policy more effective and transparent.
Central banks try to reach these targets by influencing interest rates which expands or contracts the monetary base.
This only works when exchange rates are kept floating and do not depend on government induced devaluations and pegs.
Interests rates are just one of many things that affect inflation. If interest rates are low, people are more likely to borrow money to buy things. When more people are buying, manufacturers, distributors and stores are more likely to increase prices. Things are selling, so they can raise the price and make more money. When interest rates are high, people are less likely to borrow money to buy things because their payments increase with higher interest. Sales slow down. When sales are low, prices are less likely to increase because higher prices would reduce sales even more.
I wish I knew........ I wish I knew..........
don%26#039;t know
I guess because if its a higher interest rate for borrowing will create inflation, the more money you have to pay to get loans, that is passed on to the consumer. Business%26#039;s get loans just like regular people, they pass the cost onto the consumer, But there are many ways that inflation is caused, like the falling dollar, not enough supply to meet demand etc..
Don%26#039;t no (i%26#039;m 15yrs old)
maybe, the higher the interest rate, the more money is paid so therefore more money being in circulation.
Consequently, more money being around devalues the money so inflation rises....?
Hope its right
Inflation is measured as the growth of the money supply in an economy, without a commensurate increase in the supply of goods and services. This results in a rise in the general price level as measured against a standard level of purchasing power. There is a variety of inflation measures in use, related to different price indices, because different prices affect different people. Two widely known indices for which inflation rates are commonly reported are the Consumer Price Index (CPI), which measures nominal consumer prices, and the GDP deflator, which measures the nominal prices of goods and services produced by a given country or region.
Mainstream economists%26#039; views on the causes of inflation can be broadly divided into two camps: the %26quot;monetarists%26quot; who believe that monetary effects dominate all others in setting the rate of inflation, and the %26quot;Keynesians%26quot; who believe that the interaction of money, interest rates and output dominate other effects. Keynesians also tend to add a capital-goods (or asset) price inflation to the standard measure of consumption-goods inflation. Other theories, such as those of the Austrian school of economics, believe that inflation results when central-banking authorities increase the money supply (Monetary inflation).
In one sentence, the higher inflation, the pricier things are, the more interest rates go up.
Easy - think about how interest rates effect the supply of money in the economy. If they raise the interest rates, there is less money out there .... it costs more to borrow it. ..... however, if they lower interest rates, it makes it easier for people to borrow .... and thus more money out there.
Tie this to inflation based on the amount of dollars chasing the amount of goods. If everyone is packing hundreds, then prices will go up (inflation will go up). If no one has money, then prices will go down ..... eventually ..... and inflation will go down.
Hope this helps!
My observation - and I%26#039;m not an economist - is that as spending increases so retailers increase their prices until they reach some resistance level from the consumer and they start being more cautious about spending. This is essentially inflation. Governments - always greedy for more cash then increase interest rates making credit more expensive so retailers stop raising their prices and inflation goes down. I think...
According to Terry Savage on Chicago Tonight last night, if the dollar continues to slide the yields on long term Treasury bonds will fall and the price of bonds will rise. The fed has been playing with the %26#039;fed funds rate%26#039; (overnight rate) since Greenspan was appointed by Reagan in an attempt to prevent inflation. Greenspan has been credited for the low interest rates of the nineties. Some people are now blaming him for the poor real estate market because the prices of homes became inflated as more and more people were able to get financing with low interest rates. These people normally would never have bought homes. Now they cannot afford their payments. They are foreclosing. Banks are writing off bad loans. Credit is tight. The U.S. can%26#039;t attract foreign investment in the dollar anymore. We are all screwed.
Now what was it that Chewey said??
thanks a lot
Do you mean as the unemployment rate declines?
There is a short-term trade off, known as the Phillips Curve, between the inflation rate and the unemployment rate. This, like I said, is a short-run effect only and only occurs when the shock to the economy is from the demand side. When there%26#039;s a supply-side shock like a rise in the price of oil, you will see there%26#039;s no trade off: both unemployment and inflation may rise.
On MyEssays.com you can buy an essay that I wrote about this subject in 2002.
I understand the basics, lower interest rates=higher inflation, higher interest rates=lower inflation. But is it possible to have high inflation, and high interest rates? Thanks for the answers.
Absolutely. A real life example of this is the New Zealand (NZ) economy. Inflation has surpassed the legislated standards for price stability under the Polci Targets Agreement, %26quot;inflation must be kept between 1 to 3 per cent inflation in the medium term%26quot;. Although inflation has been slightly over 3% in the last half a decade, non-tradeable inflation has averaged 4.2% over the period.
Tradeable inflation is the inflation on goods and services that have imorted substitutes to compete with them, forcing domestic producers to compete with the world price. Tradeable inflation in NZ had averaged around 0.5%, with deflation during two years in the period. Non-tradeable inflation, such as real estate, has remained high.
The central bank of NZ, or the Reserve bank of NZ (RBNZ), has continually increased the Official Cash Rate (OCR) [wholesale interest rates] to curb consumtpion and investment, thus theoretically decreasing inflation.
However, since the NZ economy has the second highest long-term interest rates in the OECD (1st is Turkey), foreign savers wish to deposit their money into NZ banks. They demand NZ dollars (NZD), which causes the NZD to apreciate. The appreciation of the dollar leads to increased inmports, as they are now relatively cheaper in terms of NZD. The result is a net increase in consumption, so increasing interest rates to control inflation is actually causing inflation to increase.
Absolutely; in fact, it is almost inevitable. If investors are to get any real return on their money, the interest rate must exceed the inflation rate.
It is possible. Interest rate is just a monetary policy tool that Central Bank can use to target or control price level. We cant say lower interest rates=higher inflation, higher interest rates=lower inflation but what we can is %26quot;raising ineterest rates%26quot; help lower inflation and vice verca.
Yes, it is possible to have high inflation and high interest rates. I think this actually happened during the %26#039;70s in the US.
High inflation can put pressure on interest rates to rise. Lenders want to make sure they don%26#039;t lose money on their investments. For example, if the inflation rate is 8% a year and the interest rate is only 4% a year, that will discourage people from lending money (thereby putting upward pressure on interest rates because there is less money out there available for borrowing) because instead of gaining 4% a year in interest by lending money, they would actually be losing 4% due to the inflation rate being greater than the interest rate. That sort of difference between the interest rate and inflation would also encourage people to borrow because the money they borrow would be worth more than the money they have to pay back (and a greater demand for borrowing puts upward pressure on interest rates).
Basically, inflation can make anything more expensive, and that includes the cost of borrowing money.
Recently I have picked up Peter Lynch%26#039;s %26quot;Learn to Earn%26quot; book. He talks about a market multiple in the book and does a cross study of Nike and J%26amp;J and says that the market multiple was more than what J%26amp;J%26#039;s PE was. Where can I find up to the minute or whatever market multiples? Also, Where could I find inflation rates as well. I know that they are based upon the Consumer Price Index but I am not educated enough to figure it out based upon that. Thirdly, since I am in the education stage of stock investing, I would like to know if anybody can recommend a stock market simulator game that doesnt coincide with the real market but is simulated for the sake of learning at a faster pace than waiting for the markets. If I could find a game that does correspond to the markets that would be nice as well. Of course I am looking for free games and no money involved. (Just thought I would make that clear) Thanks for the info
I found a game for you, but I have to have more time to find the other things you wanted..good luck%26gt;%26gt;
http://www.smartstocks.com/
http://www.bls.gov/cpi/
Thank You, Voters..
11/11/06/.. Report It
Thank You, Voters..
11/11/06/.. Report It
I need to locate or query a database that provides the inflation rates for Bogota, Columbia, monthly, from 2001 to 2005
Inflation rates apply to consumer prices within a country, not a specific city. In the case of Colombia (not spelled Columbia) ...
2001: 7.6%
2002: 7.0%
2003: 6.5%
2004: 5.5%
2005: 4.9%
What are some reasons the inflation rates are what they are today??? I need actual economical reasons. Thanks so much! : )
Inflation is tied to excess money (debt and currency) supply.
Most money is created via private loans. The Federal Reserve%26#039;s job is to make sure the private world keeps loaning money. %26quot;Open Market Operations%26quot;, %26quot;Reserve Requirements%26quot; and the %26quot;Discount Rate%26quot; are the Federal Reserves tools for keeping the money flowing. Federal injections of money (by any of these means) equate to future inflation.)
The market goes down because injections equate to inflation and the people with money to invest are concerned that future inflation (coupled with taxes) will outpace there benefits from investing in a business activity. The investors are moving to real items (such as gold). Therefore, when the fed lowers rates, the private loans continue to shrink and jobs shrink. This is what is known as stagflation (interest rates and unemployment both increase).
Here is a good description of how the Federal Reserve manipulates the economy: http://www.a2dvoices.com/realitycheck/ma...
We have been borrowing heavily, the value of the dollar has fallen.
to just look at the fallen dollar value explains enough of it.
look at oil, only traded in dollars internationally.
So lets just say $1 = 5 Saudi Riyal
Oil was $60 a barrel, so the Saudi made $300 Riyals per Barrel
Now lets say the dollar has fallen by 1/5 of value in last few years. so instead $1 =4 Saudi riyals then for the Saudi to make the same amount for his oil has to charge $75 dollars for the same oil. So we of course are paying more to buy it.
Well the dollar has fallen by more then 1/5 in last few years so naturally the above has occured even more so.
Oil though is not used in the inflation index, yes it ends up in all our products (transportaion costs), but we measure inflation based on prices to consumers so when the higher transportaion costs and any other reasons business must raise their prices actually end up causing the price to the consumer to go up then we count that rise as inflation.
So oil hikes, hits the pumps, and sooner or later also hits the groceries, and everything else. that is a source of inflation, then It costs more to heat your home and drive to work so you ask the Boss for a raise (and we raised minimum wage so even the lowest paying jobs are getting a raise), Labor costs go up, which again makes the Boss to raise prices to make the same profits, so another source of inflation. The rise in utility bills hits everyone so another source. The store rents the building the owner of the building is paying more for his groceries/utilities gas at the pump so he raises the rent: another source.
You can see it will snowplow through the economy which is why the FED normally will target interest rates to keep inflation under control as a top priority, and normally even at the expense of economic growth.
I%26#039;m saying normally as inflation was starting to rise and so the Federal reserve ws raising interest rates, but when the economy stalled so fast in the 4th quarter, they then switched and now are trying to stimulate the economy by cutting rates even though the inflation numbers do not look good, so they are Gambling that they will be able to get growth going and then be able to get inflation under control later. ???
It%26#039;s part crack-up boom, part dollar devaluation and part emerging market demand.
Im looking for historical inflation rates and governemnt interest rates for major nations such as US, UK, Japan etc dating back as far as possible.
Thanks for any suggestions or answers!
:)
http://www.whatprice.co.uk/financial/bas...
OR
http://www.thisismoney.co.uk/economy
have a good read
???Would you Please ad info about this %26quot;fall in inflation%26quot;...are you talking about a specific instance or are you talking about something more general....are you referring to increased interest rates slowing expansion and therefore increasing unemployment... in effect lowering inflation rates????
How are lenders and borrowers affected as inflation rates change and they attempt to protect their purchasing power?
Inflation lowers the value of the dollar which weakens the economy but the government can stimulate the economy by lowering interest rates. By lowering the interest rates borrowing and lending is made easier and more appealing. However, this does have repercussions since as we have seen recently...people buy more than they can afford and have their homes foreclosed on. This creates more of a strain on the economy and doesn%26#039;t really protect anyone.
Discuss the relationships which are suggested to exist between interest rates,inflation rates %26amp; exchange rates
In general: Lower interest rates --%26gt; higher money supply --%26gt; higher consumption -%26gt; higher investment --%26gt; higher income --%26gt; higher prices --%26gt; inflation
Lower interest rates (while the other country%26#039;s interest rates the same and higher than the domestic interest rates) --%26gt; money goes away from the country which has lower interest rates --%26gt; and goes to the country with higher interest rate --%26gt; exchange rates goes lower for the domestic curency (for example, money goes away from dollar and goes to Eurozone --%26gt; higher Euro, lower dollar)
As you can see, is a chain reaction. Interest rates is the crucial factor.
I hope this helps
a brief knowledge of the terms used will help suffice the answer
A fixed rate ( this means the amount being charged stays the same ex. $50.00 per month every month) will not necessarily cure the problem but it could help alleviate the %26quot;not knowing%26quot; how much the rate will be from billing period to billing period.
7% ARE YOU KIDDING ME?
Inflation makes everything go down in value compared to the money you have today. My $100 today buys me 100 shmounces (I made up a new unit to make the math easy) of gold. In one year with 3% inflation it will take $103 to buy those same 100 schmounces of gold.
If you are borrowing the money then the cost is 4% and you get the benefit of not losing the 3% that you would have lost if you waited, so 4%-3%= 1% nominal. You pay the 4% in interest rates and the 3% in the amount it didn%26#039;t go down in value because you got to enjoy the fruits right now.
If you are saving the money then it is 4%-3%=1%. You are paid the 4% interest rate which buys you 3% less when you do spend it.
As you can see inflation helps you in one case and hurts you in the other but the nominal rate is still the same. Weird huh?
Its all about the math.
4+3=7%. But to be more correct, there is a formula.
Real= (Nominal - Inflation)/(1+Inflation)
Formula is Real rate of interest = (Nominal rate of interest - Inflation rate)/(1+Inflation rate).
For lay man use and for cosidering lesser number of years, Nominal rate = Real rate + inflation rate
In this case, Nominal rate of interest is 4+3 = 7%
Is this a simple supply and demand problem, i.e., more people have money to spend, so supply goes down, demand goes up, and prices rise? How did the 5% figure that is tossed around get arrived at?
As labor is more scarce, it costs more.
As firms pay more for labor, they charge more for goods.
As goods cost more, inflation goes up.
Etc.
This is why productivity gains is the best way to wage gains.
The lower the employment rate the higher demand for workers causing wage rates to go up, causing inflation.
I am not an economics major so I will do my best to explain...
The more people in work, the more people that have money to flood the system with their money. The more money that is flooded into the system the more the prices go up. Honestly, supply and demand do not have a lot to do with it. It%26#039;s mainly that more money floods the system so the Value of the Dollar drops. When the Value of the Dollar drops, prices go up to compensate. I hope this makes sense.
The 5% figure is usually decided by the amount of american%26#039;s who are on welfare and are unemployed (must meet both qualifications). So, if you have a next door neighbor who deals drugs he is not counted as unemployed because he%26#039;s not getting money from the government only from druggies. They take the amount of people on welfare and divide it by the most recent sensus of total american%26#039;s
I believe the theory is that with a fewer unemployed people, employees have more leverage to request a raise, or leave for another job. The employer then must offer some other person more money to hire that next person away from his current employer. Thus wage increases begin to spiral. And to pay for the added salary, however small, the business man will add a little more to his product price.
Thus as wages go up faster, so does the cost of everything else. If wages can go up slower, such as with people having less leverage for a raise, inflation is kept low.
Not sure about that 5% number.
Please explain me in details as i m unawre of these terms too
so plz explain me thse terms as well as the things practically going on in USA which can affect global economy
Are you economics student
if so than understand the inflation and recession through the books
Think of interest rate as the cost of borrowing money. If the price/cost goes up, demand goes down.
Less demand for money translates into lower aggregate demand in the economy. (People have less access to money, so they buy less goods.)
Since inflation is driven in large part by the level of aggregate demand in an economy, less demand for money will usually lead to lower inflation as well.
Generally speaking, a higher real interest rate reduces the demand for money because the cost of borrowing money becomes more expensive.
If interest rates increase, expected inflation decreases as a result or the reduced demand fr money.
This strategy to %26quot;fight inflation%26quot; is know as monetary policy.
Think the interest rate as the price of money... As the price of money increases the demand for it will decrease....
As the interest rates increases people will be less prone to consume and invest.... They are going to delay their consumption...
So suppliers facing this will decrease their prices to meet to demand...
Of course we should be talking about real interest rates in here and no expectations on the consumer side...
it is because when there is no umemployment, everyone has a job, everyone is happy, everyone has money. one way to inflation is when the firms can%26#039;t find new employees and have to take and %26#039;Steal%26#039; other employees from other firms; which is done by offering a higher salary. as this happens many times, people will make more money. so the cost of production can rise for each firm, so they have to increase revenue, and other firms see this increase in salary and revenue, and raise ther own prices. this chain of events can keep happening for a long time. which will lead to massive inflation.
other way of inflation in case of total employment, is when firms see that everyone is making enough money to live happy. and the products of firms can become inelastic as everyone can afford it. so they raise their prices to make more profit, which will cause another chain of events which will also result to a massive inflation.
so in conclusion, all the developed countries, are trying to keep the unemployment rate at between 2% and 3% in the economy. which is not too low but just perfect.
When the unemployment rate is very low the marginal propensity of consumers to consume is relatively high. Which means that the amount of money in circulation is relatively bigger compared with the amount being saved and thus being in the banks than when there is a higher unemployment rate.
I.e. means that everybody is taking out of his account more money at the same time, which means, that the banks are left with less cash. The same time people want to take on new credits in order to satisfy their wish for consumption.
The Fed tells the banks how much M1 or gold they need to have in reserve with them for every 1000$ they lend to someone, this is called the reserve rate. If the reserve rate were 10% the bank would need to have 100$ deposited with the fed for every 1000$ they lend, (less the money customers have deposited in their bank). So when the demand for credits goes up the commercial banks pressure the Fed to lower the reserve rate, which means they can give out more money in credits. The same time this means that the total amount of money in circulation goes up, while the amount of gold that is deposited as a reserve doesn%26#039;t grow. Basically a dollar note is a paper that declares that you have a single unit share in the countries gold reserves.
So if there was a small country that owned only on kilo of gold and there were 5000 1$note in circulation. Every 1$note would represent 0.2 mg of gold. If the country would now double the number of dollar notes issued each 1$note would be worth 50% less (by reducing the reserve rate) or represent only 0.1mg of gold.
So in order to provide the banks and the people with more money which they are willing to spend, as they feel save because they all have a job, and the economy is doing fine the Fed lowers the reserve rate which results in an inflation.
So inflation is actually not something that just happens but which is controled by the Fed.
Everything in economics comes down to supply and demand, and when demand is high and supply is tight, prices go up. A low unemployment rate suggests that the economy is running full-out trying to keep up with demand, and that labor and other resources are stretched to the limit.
When the unemployment rate is really low (say 4.5%), it is assumed that employers are having a hard time competing with each other to hire and retain the available labor, and that they%26#039;ll have to resort to raising wages to get and keep people.
That alone doesn%26#039;t equal inflation -- it may just mean businesses will suffer lower profits. But in such a scenario, it%26#039;s likely that most other goods and services are also in tight supply. There%26#039;s huge demand for raw materials, for electronic components, for consumer products, etc. People buying things are also competing with one another just as employers do for hiring. The result may be that everyone, seeing this supply-demand situation, finds they can raise prices on their own products a bit. And THAT equals general inflation.
The low unemployment rate may just be more of an indicator of this kind of tight supply...or it could in time be the cause, as full employment leads to more people spending more money for things.
In Keynesian economics, when there is an increase in aggregate demand, two things can happen: (1) either more resources are being utilized to produce more to meet the increase in aggregate demand - in other words, more labor is being employed, more raw materials are being used, and more of the economy%26#039;s productive capacity is being employed, or (2) when the economy can expand no further, prices begin to rise to meet the increase aggregate demand. When the unemployment rate is low, it is a sign that the country is operating at or near full-employment and most if not all the country%26#039;s productive resources and capacity are stretched to the limit. The only thing that can happen when this limit is reached is inflation.
Because historically, this is what tends to happen...
Low unemployment causes wages to rise and so increases demand and therefore prices if production does not keep pace. That the fed has suppressed wage growth for the last 30 years out of fear of inflation is partly responsible for the growing income inequality in the US. Economist assume that the rich will save extra income but working people will spend any increases so large wage increases to the super rich is not an inflation problem. Given that the savings rate has declined during this period their assumption appears incorrect. The US experience in the 50%26#039;s and 60%26#039;s which had low inflation, low unemployment, rapid wage growth, and high savings rates indicate that perhaps economist are wrong.
That is why they bargained for a fixed rate and paid more for it. Adjustable rates are much cheaper....at first.
However, it is the artificially low interest rates that created the bubble we are going through to begin with, and every dollar we earn or save was devalued when the fed kept playing with interest rates, and the banks got the %26#039;new money%26#039; in loans, so at this point they have created a real problem with forclosures, never mind the calculated cost of a fixed/vs adjustable rate of interest.
The forclosures and newly %26#039;bad%26#039; debt and secondary impact to the rest of the economy is what is causing the Bears Sterns type problems.
Vote for Ron Paul. He is the only one who has a plan to address it, or at least not make it even worse as the other candidates would do with CONTINUING the overspending of money we don%26#039;t have. He would drastically slash costs to get us back on track while increasing the money left in our pockets in this economy.
The slowed economy is because the earth is running out of oil
Well in the past going to war has helped. I%26#039;d say we%26#039;re doomed.
oil is not the problem...we have enough in reserve to last 75 to 100 years...lower taxes to begin with will stimulate the economy...until that happens inlation runs rampid...
print more money, see what the feds doing, we%26#039;ll have more money than oil.....but our money will be worth monopoly money if they keep printing it
The interest rate is the cost of borrowing money. When Interest rate falls, the the quantity of money borrowed increases and therefore aggregate demand (that is, the amount of consumer and investment expenditure in the economy) increases. If the economy is not at full capacity and therefore less than full employment, an increase in aggregate demand would create excess demand and encourage suppliers to increase production. More persons would be hired and the unemployment rate would fall. However, if the economy is already at full capacity, then an increase in aggregate demand (expenditure) would put upward (inflationary) pressure on the price level.
If you believe the conservative approach, money gets easier to borrow so business borrow more, spend more and hire people. Since there is more money around, people spend and prices go up. When prices go up it%26#039;s called inflation.
Typically, unemployment decreases. As to inflation, there are too many other variables involved...
1.Inflation is an increase in the average price level of the goods and services in the economy. The unexpected inflation will shrink income. The greater the rate of inflation the lower will be the quantity of goods and services that can be bought from the given nominal income. Nominal income does not measure the actual purchasing power, this is measured by real income. Real income is the actual number of dollars received adjusting to the change in the price level. If the CPI (Consumer Price Index) increases and the nominal income remains the same, the real income i.e. the purchasing power decreases. Thus the consumers can buy little from the same amount of income they had before inflation occurred. Inflation also affects the wealth and the interest rate. Inflation can benefit the wealth holders since the value of assets often increase faster than the rise in consumer price. On the other hand, those who do not have wealth may suffer since due to rise in assets faster than inflation, it becomes difficult to acquire wealth. Unexpected inflation may benefit the borrowers. The real interest rate is equals to nominal interest rate minus the inflation rate. If the inflation rate is 10% and the nominal interest rate is 5% then the real interest rate will be -5%. This means even though the nominal interest rate of 5% is paid, the actual purchasing power will fall by 5% since the inflation rate is 10%.
Authorities can assure the markets, consumers and producers that they will keep inflation low by firstly, making sure individuals and businesses does not spend money quickly to buy goods and services when inflation occurs in fear of paying more tomorrow. Secondly, making sure nominal interest rate does not increase with the increase in inflation otherwise this will make the payments of installments difficult. Thirdly, making sure wage-price spiral does not continue to a greater extent. And making sure the new factories, machinery and technological research are carried out. Also the government should not print money to pay bills which will rise prices frequently, sometimes increasing in minutes.
The devaluation of money.
you got it
you are absolutely right!
this is not Jeopardy, where you give us the answer and we ask the question, BUT--I will ask anyway--WHAT IS THE QUESTION ???
Think that economics is study of nature, properties, composition, laws and classification of wealth. Now answer the question: Is Inflation a form of wealth?
Before proceeding further, let us study Law of Conservation of Wealth. According to basics of algebra, one can add 2a and 3a. One can subtract 2a from 3a. Can any one add or subtract 2a to/from 3b? No. Can anyone add 2 kilometers and 5 kilometers? Yes. Can any one subtract 3 kilometers from 5 tons? No. Let a be wealth and b be non-wealth. We can not add or subtract non-wealth to/from wealth. This leads to the inference or conclusion that wealth only can be added/subtracted to/from wealth. This is in simple words Law of Conservation. Wealth can neither be created nor be destroyed but can be changed from one form to another. Now, consider the following reactions of wealth:
1. Present value + Time = Future value
2. Present value + Inflation = Future value.
OR Inflation = Future value - Present value and
Time = Future value - Present value
From the above, we come to understand that inflation = time.
Since inflation is measured in units of wealth, inflation is a form of wealth.
Where do you classify this form of wealth? We can classify wealth in two broad classes : wants comprising of goods and services that an economic entity wants to own or possess and means comprising of money and money related forms of wealth. If I am asked to classify inflation, I would classify it as means since it is often measured in units of money. Further if one classifies means into future means (like loans, credits etc), and present means, I would classify inflation into future means.
Now consider this equation: Present value + Interest = Future value.
From this equation, we come to know that inflation = interest.
Finally, I would summarize the properties of inflation. Inflation is a form of wealth, generally measured in units of money or as percent of present value of money and that inflation can be changed to other forms of wealth like interest, time, etc.
It is time now to study wealth on the lines chemists study matter since chemistry is study of nature, composition, laws, properties and classification of matter. I would rather advise to redefine economics as study of nature, properties, composition, laws and classification of wealth.
Simply put. Inflation is the devaluation of money, by increasing the supply.
It%26#039;s a hidden tax, and a means of wealth transfer.
e.g.
1. Government requests to borrow $100,000.
2. The reserve bank creates $100,000.
3. Government spends $100,000 into economy.
4. Money supply increases by $100,000.
5. More money chasing same amount of goods = more spending to buy same amount of goods = price rise = inflation.
The government got the full value of the $100,000 because inflation takes up to 6 months to surface. After 6 months the $100,000 would buy fewer goods or services.
You have it nailed. Well done !
Why all the gloom and doom?
I hear people talk about the %26quot;mess%26quot; - what mess???? Bush has made a mess of IRAQ but certainly not AMERICA.
I sometimes see bumper stickers that read %26quot;had enough? vote Democrat%26quot; - - - Enough of WHAT? Growth? Low unemployment? Rising incomes?
NO, I HAVE NOT HAD ENOUGH OF THAT!!!!
Economically I have never been able to figure out what mess people are talking about. Some folks get in over their heads on their mortgages and all of a sudden the sky is falling? Come on people should look around.........
There has been no mess made of America. I agree that I haven%26#039;t had enough yet either of the booming economy...even my charitable donations are up because my income is! (yes libs my taxes are up too since I make more now, that should make y%26#039;all happy).
Good post.
We have come through a recession, a terror attack, natural disasters, financing a war, and corporate crime and still have a great economy.
I%26#039;ll take some more of that.
I think bumper stickers are stupid, but I think the %26quot;enough%26quot; is referring to all the corruption and war.
How great is the economy when it%26#039;s based on credit? Do you think America can borrow money forever?
I see. Well, I do agree with you. I was throwing that out for the sake of arguement. Sometimes I hear about how China owns our national debt.
You can thank the Fed for those numbers. People forget the mid to late 70%26#039;s and the early 80%26#039;s when we had an inactive and weak Fed. Volker came along and put monetary policy on the right course and since then inflation, unemployment and interest rates have been under control.
People have short memories and forgot about double digit inflation, interest rates and unemployment happening all at the same time.
But then again Carter was president at the time.........
So many people just have one thing on their mind while cashing their checks,(Bush %26amp; Cheney are Bad). Everything in their lives aren%26#039;t as important as that.
This is the liberal mindset. Doom and Gloom sells better than happiness. I have done better under Bush than any other President. The voices of the happy are stifled by the voices of the liberal media.
We are headed into a recesssion. But if the neocons want to stick their heads in the sand--fineby me. It will hit in 2008--and their rhetoric and political slogans won%26#039;t change that. So will rising inflation.
Wait, soon you%26#039;ll hear the clamor of little propagandist claiming that the low job rate is caused by more %26quot;burger flippin%26quot; jobs, low interest rates are caused by people losing their homes, rising incomes are the rich getting richer off the backs of the poor, blah, blah, blah, blah.........
Remember, they need to convince people that it%26#039;s bad out there, not for them of course, but for everyone else. That message plays well to the ignorant.
Same with me.
do you buy anything?? do you have kids in college?? do you pay for any health insurance??
inflation is exceeding wages big time. Real income has been down every year Bush has been in office.
the value of the dollar is at an all time low.
college tuition has doubled since 2000.
health care costs have doubled since 2000.
savings for the average American is at an all time low.
debt for the average American is at an all time high.
foreclosures at an all time high
bankruptcies at an all time high
Keep drinking that Kool-Aid! Bush has taken us from a surplus to a 3.2 TRILLION dollar deficit. Sooner or later someone is going to have to pay that debt and if he has his way it won%26#039;t be the rich. Unemployment numbers are not high because so many that are out of work have given up and those that do get a job get burger flipping wages. Wake up, you and your children and your grandchildren will be paying for this joker%26#039;s mistakes for the rest of their lives.
The mess I see is an America that is divided more than even before. People are holding on tight to their partisan titles and refusing to budge.
And, must we remind you, our country is in debt $9 trillion. This after having a surplus of $230 billion when Clinton was in office.
I%26#039;ll also remind you that home forclosures are at an all-time high, the number continues to rise and Americans are in more personal debt than ever before.
Alan Greenspan was on the Daily Show with Jon Stewart, he didn%26#039;t seem the least bit concerned with our economy. He was very relaxed and confident. I like the money I am making, and I am also giving an increase to charity and paying higher taxes as I move up in tax brackets. Alas, though, we probably should change course so we can actually use Hillary Care.
Because smart people realise it%26#039;s a house of cardswaving in the wind and at any moment it could come tumbling down.
Stop living right in front of your face, use a little foresight and intelligence. That%26#039;s why we%26#039;re having this housing issue today.
I won%26#039;t bother answering all of these but you are being fooled by Bush economics. That%26#039;s what Greenspan was trying to say. Tax cuts MUST be accompanied by equal cuts in spending-that%26#039;s supplyside economics. Bush is instead using Keynesian economics(using high goverment spending to spur the economy).
They also believe in positive prapaganda. By making you believe the economy is good, you spend more money which spurs growth.
Low inflation? Are you kidding me? How about Bush running up the largest national debt in modern US history.
Have you not looked at a simple graph of the DECLINING value of the US Dollar?
Many other countries are now stocking Euros instead of USD.
I highly suggest watching a few documentaries about our money system and how it will eventually collapse.
Remember history class and those Europeans buying a loaf of bread with a wheel barrow full of currency? Or using it for heat in the winter?
I really don%26#039;t think inflation is LOW. I don%26#039;t know about you, but I pay 300 a week for groceries for my family. That%26#039;s about 175 dollars a week more than 7 years ago. My gas budget is up about 300 a month for my family. Housing has doubled if not tripled in many areas. Yes I have been making more, but Is your standard of living any better? I have much less extra money than I had 7 years ago. That is the mess. Yes I have had enough. Your BUSH stinks!!!!!!! That should be a bumper sticker.
Under the pretty dress, the underwear has holes.
The mess, is that we have a stock market unrelated to the real or projected wealth of the company. The way we get those rosy figures is to drop the unemployed and no longer eligible. You also have to consider the fact that we have yet to see the tremendous influx of mortgage companies that went bankrupt. Low inflation is a joke, they removed food and energy costs from that equation a while ago, those have been on the increase, along with medical costs, and they far exceed the rate of inflation. But you can buy a luxury car for about the same. I buy a lot more food and electricity and gas and oil than I do luxury cars, but maybe that%26#039;s just me.
The mess most people refer to though is the coming mess where we have to start paying for a war that%26#039;s costing us ten billion a month. Why we can afford to pay for this war when we claim we can%26#039;t afford to give our citizens health care when it would only cost one-twelfth of this per year is another story.
The bills for this war come due after he leaves office. Leaving the next president to in all probability be a one-termer.
So now you know, what looks good on the outside, has nothing to do with whats happening on the inside, but sooner or later, the outside wears thin and we are left with our asses hanging in the wind.
growth in the U.S. has been the result of borrowing by both the government and people. This can continue as long as someone outside the U.S. is willing to finance our debt and the Federal reserve floods the world with U.S.dollars. It will soon all end in a big,big mess
2% Inflation. In a recorded conversation today slash interview by Ron Paul, Ben Bernake stated that inflation was running at 2%. You can see it at the URL below. In the interview, Ben said that %26quot;The inflation rate is something we pay close attention to...%26quot;.
Now that is said. Most of the production people in my company has been let go or laid off. The majority of Production is moving to China. And that 2% rate does not include food or gas. If it did the, rate is more like 18%. It looks good but times are tough and look worse ahead.
When expectations for inflation rise, investors feel that gov. or the fed will counter with contractionary fiscal and/or monetary policy, which leads to higher interest rates. The price of bonds decrease when interest rates rise.
You are asked to lend a friend $100. The friend insists on paying you for the opportunity cost of using your money for a year. You agree that 3% is a reasonable return for the postponed use of your own money. It is predicted that the expected rate of inflation will be 8%. But you are concerned that inflation might be much higher, so to protect your purchasing power you ask your friend for payment of the $100 plus interest to date if the inflation rate goes above 8%. Interest to date would be the current inflation rate plus the 3% return.
If inflation stayed at 8%, what would your friend owe you? If the inflation rate increased to 10%, what would your friend owe you?
I know that Real Interest Rate = Nominal Interest Rate - Actual Inflation Rate. But I%26#039;m a bit confused on which is what. If someone can help with perhaps a way to set it up or something I%26#039;d appreciate it.
Thank you.
If inflation stays at 8% your friend owes you $100*1.11=$111.
If inflation jumps to 10% then they owe $100*1.13=$113.
The friend has insisted on paying a real interest rate of 3%. So to find the nominal interest rate you add 3% to the inflation rate. In the equations above 1 represents the principal while 0.11 and 0.13 represent the nominal interest rates which satisfy the 3% real interest rate requirement.
Can a knowledgeable comment in English, how they come up with the inflation rate? What parameters are use to come up with the inflation rate? Are those the same parameters that all countries use? Is Inflation rate set by Federal bank? What is a good inflation rate and why? When an inflation rate is TOO low and why?
Thanks!
Inflation is calculated by comparing the change in the cost of living from year to year. Many of the goods that make up the standard of living are the same in different countries but there are also different goods used by different central banks. The Fed sets monetary policy with an inflation range in mind but does not target a specific rate nor does it determine the actual inflation rate. An inflation rate of between 2%-4% is a good target range. It is not too high, which would be detrimental to economic growth because interest rates would rise to compensate for the declining value of money. If you expected everything you buy to increase by 5% you would charge an even higher interest rate to anyone who wanted to borrow money. It is also not too low, which could fuel deflationary expectations which can jam up the economy as people stop buying goods while they wait for prices to bottom out before making purchases. If you expected prices to start falling but didn%26#039;t know by how much you wouldn%26#039;t buy anything until you knew when prices were going to stop falling.
The inflation rate is identifiable by the Consumer price index:
it is a weighted/ measurement of the cost of a group of products that we all buy, you%26#039;ll see it report as excluding the commodities like oil as they weight for the rise in them to actually influence the price of the products at the retail stores.
Other countries measure there own similiar based on the products all their citizens buy, or some in %26#039;odd%26#039; (usually a small third world) comparison, compare the value of their currency to another (mainly) the dollar but that method has gross flaws.
So the Fed and Gov%26#039;t use the prices to determine inflation; and the Fed uses that as a partial determination as to whether intterest rates (the fed fund rates) need to change, raising the rate to try and slow the growth of the economy or cut the rate to try and expand growth; on the idea if borrowing is cheap business will concider growth (like building a new factory ect.) so the economy starts expanding again.
The FED comes up with a range to keep inflation at, as they want to maintain growth, but don%26#039;t want to much growth at once, if you grow to much ahead of say other countries, you%26#039;ll get to the point where your products can no longer be competing, and causes a slow down till the world catches up; also and probably of greater importance is when the economy and interest rates are not predictable, then any investments and spending decisions are at a higher risk as to whether the can make a sound decision on the matter; so only necessary barrowing and spending occurs untill decisions can be made %26#039;Smartly, ie. with predictable results%26#039;;
2-4% is about the FED target; below 2% is normally the recessionary point, above 4% is viewed as getting to heated, both of course of a continous period of time normally a couple or few Quarters. The reason for the targets like 2% for recession (although not actually negitive) is they know the number is not a perfect measurement, and if prices don%26#039;t ever change there is never a benifit of buy today over tommorow so the delay in purchase that occur would push it negetive, and then you%26#039;ll definetly will stop making any unnessary purchase today that you can get tommorow cheaper. Problem can be seen today in the Housing sector, house prices falling so people owe more then their house is worth; so they can%26#039;t afford to sell it. and it is worse since they bought it with temporary reduced interest rates no going to be set at higher rates, they got to pay more for it now. If the whole economy was sliding it would really be worse as they very well might see the pay reducing.
think I got all them ?
The third link is to the Fed itself it has a wealth on info and statics; Some of those stats are complex but not all.
4th is CPI site with a bunch of info.
I really don%26#039;t get this. At the moment, most inflation is directly or indirectly related to the price of fuel. Many people do not have mortgages and have enough money to support themselves without using credit.
How can the reserve bank continue to assume that interest rates will control inflation when, rate rise after rate rise, price inflation seems to continue?
It is precisely because oil (an import) is so important to overall inflation that the interest rate helps control it. When a national reserve bank raises its interest rate, the currency becomes more expensive, and this helps keep imports, like oil, cheaper.
The price of oil is denominated in US dollars, and the US is keeping its interest low, so these policies complement one another. A drop in interest rates in Australia or a rise in interest rates in the US would make Australia%26#039;s imported oil, and therefore everything else, more expensive.
A high interest rate hurts people who do have mortgages or need other credit, so that could be another reason why a high interest rate isn%26#039;t such a bad policy in Australia%26#039;s case. Everything would be different if Australia was exporting lots of goods and producing most of its own oil. Then you would want to lower interest rates to keep boosting production and keep your exchange rate low for foreign buyers.
i try not to focus on notteeng except forr soda and a fighting
Doubtful. The headline inflation is a huge issue and should definitely be considered, but in truth Ben is picking and choosing his interest rate...which means he is sticking with the Core inflation rate. To be honest, if we consider the home inflation rate, in conjuction with the headline, we actually have been suffering with an 8-10% inflation rate. the housing issue corrected itself, which leads me to believe so too will the headline. But I am just %26#039;that kind%26#039; of economist.
The principal issue with the headline being so high is the impact the oil prices had on fuel, which then translates into food manufacturing and shipping. The biggest culprit to this increase was the decling value of the dollar, which has been steady since 99/00.
This is why I am doubtful Ben will stop lowering the rate. I think the Fed will lower the next rate by 50 basis points with another 25 to 50 in the months to follow. This is largely due to their fascination with the core inflation rate, as the headline can easily be explained away as being the result of the declining dollar value, with inflation%26#039;s impact on the dollar value being nominal.
Now the USD saw a 4% bounce in Q4 of 07, and is expected to see another 4% bouce this quarter. This will naturally adjust the headline inflation numbers for this quarter and will serve to encourage Ben in his current reasoning to continue the lowering process.
No. For without the intervention of the Congress to rein in the Federal Reserve Bank, and the declining purchasing power of the falling dollar in the currency markets , Wall Street will demand for more interest rate cuts. The fact that the Dollar has no other commodity backing, like gold, silver or as outrageous as this may sound, corn. Lack of Congressional oversight of the Fed is the primary reason that the interest rate cuts have no real world impact on fighting Inflation in a devalued Dollar market. High Oil prices are one factor that the purchasing power of the Dollar has fallen. Devaulation of the Dollar on the currency market and its falling purchasing power are another. Until these factors are adressed Inflation will rise and the Fiat paper money of the FED printing more will flood the market causeing an oversupply of a devalued currency.
Inflation will absolutely not stop the FED from cutting its target FED funds rate. The FED funds rate is now way above the 3-month t-bill yield and almost equal to the 30-year yield! That is crazy, the FED has a long way to go before the cuts are done.
By the way, I read your response to a question about Keynes and a possible recession. The piece was written a month ago and you responded with (...should the US economy go into recession (which it hasn%26#039;t yet, despite all the talk about it). How you could write that 1 month ago and not realize recession was imminent is beyond me. Over a year ago, I predicted a recession for 4th quarter 2007/1st quarter 2008 . On top of that, I was almost 100% certain about 2 months ago that recession was imminent or we were already in one, the leading indicators were all flashing bright red.
I don%26#039;t think it will for two reasons.
1) I agree with the skepticism above about the core inflation rate and the Fed tending to cut rates if they can justify it, even weakly.
2) The nature of the credit meltdown has given them a lot of freedom in this regard. Even with the Fed cutting rates, the rest of the tranmsisison mechanism (bank lending, securitizations, mortgage companies) have all gone from creating credit as fast as they can to slowing down (or in some cases shutting down). With credit as tight as it is, the Fed will not be risking much inflation by cutting rates.
The catch is, they will be setting us up for inflation once the credit markets settle down in 12-18 months.
As Inflation rates are extremely important within an economy, should the government concentrate just to increase or reduce inflation rates?
What happens in the economy regarding employment, investment, exchange rates, exports and imports when inflation levels are stable and near the target rate?
It depends on who you ask.
Most people are relatively unaffected whether inflation is 3% or 4%, as long as their wages keep up.
However, if the unemployment rate goes up 1%, individuals start to feel the crunch.
Inflation rates are usually dependent on the current status of the economy. The answer to your question is dependent on the current economy because you have to balance it out. To much of one is bad as to much of the other.
Govt. has very little power or capability to achieve multiple macro-econimic objectives.
Low and stable inflation is obviously a desirable economic objective. However, govt. or the central banking monetary authority can only anticipate gathering inflationary presures and reduce its own contribution to inflationary pressures. The govts. contribution to price increases/ inflation comes through running high levels of budget deficits financed by printing money, high levels of indirect taxes, control over private enterprise in investment in capacity creation, exports and imports, and wastage of national resources by keeping alive inefficient public sector activities. But seldom govt.s would reduce their exploitation of the citizens through the above measures. Rather they would leave it to the central bank to raise cash reserve ratio and raise the rates of interest so that the private sector finds its costlier to borrow and banks find lower resources to lend to the private sector. These measures generally reduce investment in fresh capacity thus reducing potential supply in the future period thus paving the way for future inflation. The only reason why inflation do come down, and only in some cases after such anti-inflationary measures are taken, is just the private sector continues to take risks more than they would normally do and find new innovative financing schemes to overcome the obstacles created by the govt. and the central bank. However, the common people are hit harder if the govt./ monetary authority takes anti-inflationary measures that are directed at contrlling private sector investment and production activity: the only consolation is that the paper tiger controllers of inflation show that they are concerned with people suffering from high inflation. You are right govts. should concentrate on controlling inflation only, but they should do that by reducing taxes, reducing govt expenditure, removing controls on exports and imports, abandoning down wasteful public sector operations, selling inefficient public sector enterprises to the private sector and even to the foreigner as well as run budget surpluses.
If inflation rate is low and stable, uncertainties and market distortions are lower. This means exports, imports, investments and exchange rates do not become volatile. High and unstable inflation, creates greater uncertainty in the minds of investors, exporters, importers and traders in currencies. With all these remaining stable, employment also remains relatively stable. But when Govt. takes anti-inflationary policies of the type they normally do, investment and employment are adversely affected, exports and imports may go down overall except to the extent govt. allows extra imports to increase supply within the economy. If however, the govts. take antiinflationary measures of the type they normally are reluctant to do, inflation control becomes more effective and the adverse effect is limited and only for a short while.
Most economists and politicians will not agree with my opinion.
The sterling exchange rate stabilized the currency and locked inflation as interest rates dropped and kept the currencey viable.
The UK is tough and stable, able to withstand inflation.
%26quot;do your own homework%26quot;
If the consumer price index (CPI) for the year 2004 is 190, does that mean that (the annual rate of) inflation in 2004 was 90 percent ?
A.) Yes. A CPI of 190 is an 90 percent increase from 100.
B.) No. the inflation rate is always the same as the nautural rate of unemployment which is about 5 percent
C.) Yes. A CPI of 190 is an 90 percent increase in the price level from the base year. The inflation rate in 2004 is 90 percent
D.) No. the inflation rate is the percentage increase in the price level from the previous year, not the base year
which one is it please help thank you
D.
Most appropriate answer is:
D.) No. the inflation rate is the percentage increase in the price level from the previous year, not the base year.
[ if the base year is 2003, then CPI for 2003 would be 100 or the CPI for 2003 happen to be 100, and with CPI of 190 for 2004, the annual inflation rate for 2004 would have been 90%].
The Bush administration has been touting its %26quot;tax cut%26quot; as an economic boon for the economy. They fail to point out, however, the the spending deficit, which worsens with this tax cut, is creating a high rate of inflation. As I mentioned in another question, the US dollar has lost 34% of its value in just 5 years.
The fact that the average American must pay more for its products and services is an added tax to the middle class. If the government continues to spend more money without raising taxes, this inflation rate will snowball.
Bush%26#039;s economic policy is a disaster. You cannot decrease taxes without decreasing government spending. Somehow the excess government spending will cost the taxpayer. Inflation is the cost we are facing today.
To be fair, Bush%26#039;s tax cut has worked surprisingly well, but it is Reagonomics and common sense tells us in the long run it will not work. The economy has grown, and numbers on Wall Street are good which may save us in the end.
Also, the US government has little control over the proliferation of foreign currency, if the Euro becomes stronger decreasing the value of the dollar, then there%26#039;s little we can do to fix that in the short term.
by all way, no
BEST ASK WHY SOME GOVERNMENTS LIKE INFLATION. TWO EDGED SWORD. IF GOV BORROWED ON A FIXED INTEREST THEY GET TO PAY BACK WITH INFLATED DOLLARS. RATE OF EXCHANGE NOT INCLUDED IN COST OF LOANS. GUARANTEED BY DOLLAR NO MATTER THE VALUE OVERSEAS.
THE OVERSEAS DEVALUATION OF DOLLAR HAS NOT HIT US SHORES SO THAT PEOPLE NOTICE BUT IT IS HEADED HERE REAL FST. AS OF NOW US IS TRYING TO BUY UP ALL ITS CURRENCY FOR AFGHANISTAN AND IRAQ THAT WAS NOT BORROWED JUST PRINTED AND OUR STTE IS TRYING TO GRADUALY DECREASE ITS VALUE OVERSEAS SO FREIGN ENTITYS WILL USE THEM TO BUY US PROPERTYS AND BUISNESS. IN LAST YEAR ALONE OVER 4 MILLION ACFES AND ALMOST 1 TRILLION DOLLARS OF US ECONOMY WENT INTO HANDS OF OVERSEAS ENETITYS.
OVERSEAS ENTITYS BUYING US CORPS AND LAND AND THEN PAYING LOWER WAGES AND BENFITS THAN WORKERS HAD BEFORE.
Not that I%26#039;m completely happy with Bush%26#039;s fiscal policy but to assume that higher taxes are the only way to generate higher tax collection is absurd. The tax collections are going through the roof. And a little enforcement will make it even better. Problem is it is being spent on out of control entitlement increases. Entitlements that have only been around about 50-60 years. Way too much being given away. Wars don%26#039;t help but they%26#039;re a necessary evil. You can not get around war as history shows.
You do realize that all of the same measurement tools are used now as were used during Clinton%26#039;s economy?
Inflation is and has been at a very low level based on historical numbers.
And I still think its funny when people try to pretend that Clinton didn%26#039;t use Supply Side Economics in his policies. Did Clinton return to the pre-Reagan days when the rich were taxed by 70%+. Nope.
Some of you people need an education.
Every Republican Administration has used forced inflation to cover all of their corporate tax breaks all the way back to President Taft%26#039;s Administration. If you remember right, Taft caused the break down of the banks and the great depression.
-Is inflation the invisible tax?
It is pretty much invisible but it%26#039;s not a tax.
-The Bush administration has been touting its %26quot;tax cut%26quot; as an economic boon for the economy.
It has been a boon. REvenues from income tax are up from what they were before.
-They fail to point out, however, the the spending deficit, which worsens with this tax cut, is creating a high rate of inflation.
You want to talk about a high inflation rate and blame Bush for it go right ahead. But you just may be wrong. Inflation today is very low when compared to the terms of Carter, Reagan, and Clinton.
The rate of inflation you quote would have had to be almost 7% per year. Inflation has NOT been that high during Bush%26#039;s term.Even with compounding it doesn%26#039;t come to 34%. You want to talk high inflation look at the Carter years.
-The fact that the average American must pay more for its products and services is an added tax to the middle class.
How is this a tax?
-If the government continues to spend more money without raising taxes, this inflation rate will snowball.
Well the Democrat now control Congress when are they going to cut spending?
-Bush%26#039;s economic policy is a disaster. You cannot decrease taxes without decreasing government spending.
Sure you can. As long as the tax reductions generate greater income tax revenues.
-Somehow the excess government spending will cost the taxpayer. Inflation is the cost we are facing today.
Yep I agree --but the cost is lower today than it%26#039;d been in the past.
A lot of people seem to believe the government reports on the rate of inflation. That%26#039;s really a joke. The government completely changed the formula for calculating inflation.
During the 70s, staples weighed in heavily on the inflation rate. Today, they are hardly counted. The government puts more emphases on items that cost less over time like TV sets and computers.
That%26#039;s how they beat inflation in the 70s. They changed the formula. To get a real idea of inflation, you need to look at the international currency market. The dollar has lost more than a third of its value in the last 5 years. That is inflation.
When in the world did anybody ever start to believe figures the government publishes? I am afraid the government looks thru rose colored glasses.
what is the meaning of inflation rate 6%, how it calculate,how inflation rate can be increase/decrease. what factor depends on inflation
Inflation is a measure of cost of goods/services. In short if there is plenty of demand but less supply, the costs go up and so does inflation. Also, if demand cools, then the costs come down and so does the inflation.
Inflation is generally measured by a basket of goods that is generally used by the public (mostly it is the basket of consumer goods). Each goods has its share in the basket and the weighted average price of those goods is the Consumer Price Index (the weighted average price of consumer goods). The change in this index is the inflation. So 6% inflation means that the Consumer Price Index in terms of base period has increased by 6%, in other words, the weighted average price of consumer goods has increased by 6%.
If you need additional information just mail me.
In economics, the inflation rate is the rate of increase of the average price level (a measure of inflation), usually some form of consumer price index. Alternatively, the inflation rate is the rate of decrease in the purchasing power of money. This is sometimes expressed as an %26quot;annualized%26quot; number, even if the period measured is less than a year.
The rate of inflation is a variable used to calculate the real interest rate, as well as real increases in wages. In general inflation rates are calculated so that they can be directly subtracted from some other rate. In general an inflation rate will be stated in seasonally adjusted terms.
If P0 is the current average price level and P 閳?1 is the price level a year ago, the rate of inflation during the year might be measured as follows:
Inflation rate=((Po - P-1)/P-1) x 100%
There are other ways of calculating the inflation rate, such as logP0 閳?logP 閳?1 (using the natural log), again stated as a percentage.
There are two general methods for calculating inflation rates - one is to use a base period, the other is to use %26quot;chained%26quot; measurements. Chained measurements adjust not only the prices, but the contents of the market basket involved, with each price period. More common, however, is the base period reference. This can be seen from inflation reports from the %26quot;relative weight%26quot; assigned to each component, and by looking at the technical notes to see what each item in an inflation basket represents and how it is calculated.
Some people say that the economy is very strong because we have had very low inflation rates for years.
However in many areas of the United States the price of a home doubled in less than five years. That doubling in the cost of housing has not been reflected in the official inflation rate.
What do you estimate the true inflation rate to have been during the past five years as opposed to the artificially low official government numbers?
A very effective way to estimate the true rate of inflation is to compare the increases in prices of basic commodities used in the food industry and tha manufacturing industry.
If you will compare the prices of basic commodities such as Corn, iron, copper and aluminum over the past five years you will see that on average those prices have doubled over the past five years.
Those prices a published in The Wall Street Journal. It is very easy to look them up.
A doubling of commodity prices over the past five years translates to a true inflation rate of 15%
I run 32 lbs in the front and 30 lbs in the rear
Imagine in your wild dream that economics is sensibly defined as study of nature, composition, properties, laws and classification of wealth. Start studying wealth the way chemists study matter.
Present value of wealth + Inflation = Future value of wealth
and,
Present value of wealth + Time = Future value of wealth
Present value of wealth + Interest = Future value of wealth
From above we deduce mathematically that true value of inflation = Value of time = Value of interest and inflation is a form of wealth.
I have $50 in my US Dollar paypal account. The current inflation rate of the US dollar is 2.5%. The inflation rate of the Japanese Yen is 0.4%. If I transfer the $50 to my japanese yen paypal account, how much would I expec to earn in 1 day? 1 week? 1 month? 1 year?
Whenever you convert money from one currency to another, fees are charged, so I doubt you could make any money.
the same amount, because the jappenese economy is at a different standpoint, and transfering will not do anything for you.
Their are alot more factors to look at than just the two inflation rates, and those rates seem qiute conservative most estimates i have seen for us inflation put it at an average of about 3.2-3.3 for quite a while now, and the japanese inflation is usually a bit negative due to their high inflation.
In addition to exchange rate fees exchange rates fluctuate to keep other things in balance so if you really want a projected rate of what you will make you would have to look at what the futures market for currency is doing depending on how long you would want to hold it currency futures can go as far as 10 years out, with such a small amount of money however transaction costs would definitly bring your earnings negative, and currency is an investment as is any other security so their is no guaranteed return, if thier were everyone would do it.
The real interest rate must be
A) high if inflation rate is greater than the nominal interest.
B) positive if the nominal rate of interest is greater than the rate of inflation.
C) high if the nominal interest rate of interest is high.
D) negative if the nominal rate of interest is greater than the rate of inflation.
E) low if the nominal interest rate is high.
Any help is appreciated. Thank you!
Real interest rate is equal to:
Nominal rate - inflation rate.
All you have to do is apply that formula to each answer.
For example, A is NOT true because if the inflation rate is higher than the nominal rate; your real interest rate is negative.
Edit: Obviously C %26amp; E cannot be solved without the inflation rate, so cross them off. Using the supplied formula; it can be easily determined whether B or D is the correct answer.
For interest rates check the Wall Street Journal.
In order to stop inflation, the Fed is supposed to increase interest rates and decrease the money suppy. So why are they lowering interest rates if inflation is looming
The FED is lowering rates to avoid or reduce the chances of a total financial collapse of the US economy much like 1929.
Inflation is being caused due to foreign buying of commodities such as the grains and oil. Mostly from China and India. Inflation is not being caused by the increasing of capital goods prices or due to a robust US economy which would normally cause inflation.
Commodity prices in general are causing the inflation. The FED took 4 years to figure this out.
The FED is finally more concerned about the US economy collapsing and bank failures than they are about inflation right now.
The FED is willing to deal with inflation for the time being. As the economy improves (real estate and credit markets), the FED will increase rates more rapidly in the future.
Note: Inflation is good. It means there is growth. No inflation means no growth. The USA is in a Stagflation environment = Recession + Inflation.
The plummeting housing prices are pushing the economy toward DE-flation, not IN-flation.
The lowered interest rates are to help prevent more bank failures, such as Bear Stearns, whose stock went from $150 to $2 in 12 months.
Rates are raised to either damp inflation or cut to stimulate the wider economy.
The federal reserve balances these two risks, and the risk of an economic downturn at the moment far outweighs the risk of inflation.
Remember that an economic downturn will have a severe damping on inflation anyways, so if the economic news is bad, then future inflation pressures will be somewhat moderated, increasing the liklihood and ability of the Fed to cut rates.
well, right now the economy is bad enough that Fed took that as a priority before inflation.
There%26#039;s also the issue of the availability of credit. That is, the ability of people and businesses to borrow money.
Large financial institutions have swung from one extreme to another. Not long ago they were lending people money to buy houses who really didn%26#039;t qualify for those loans -- on the theory that house values would continue to climb, and people would pay their mortgages above all other debt. (Given a choice, would you rather lose your Visa card -- or live in the street?)
Now they%26#039;re afraid to lend anybody any money, and the ones sitting on billions of dollars of subprime mortgages are in a severe cash flow situation.
So the Fed is lowering interest rates to encourage people to borrow, to keep money flowing through the economy.
You are correct in that there are high inflationary forces still at work on the economy -- the price of oil keeps going up, which will force up the price of goods and services.
Lower interest rates in the U.S. are bad for the value of the US dollar, which means we%26#039;ll be paying more money for exports.
So, is it wise to lower interest rates? I don%26#039;t know. Bernanke is between a rock and a hard place.
It%26#039;s probably healthiest in the long run for bad debt to be squeezed out of the economy ASAP -- but that inflicts a lot of pain. Since the Great Depression, we%26#039;ve been unwilling to endure it.
How many families do you want to see on the cable new shows evicted from their homes, partly because of their own bad judgment but also because of the bad judgment of the company that approved their mortgage?
(I continue to hold a grudge against General Motors Acceptance Corporation because they approved a car loan I didn%26#039;t think my wife and I would qualify for. I didn%26#039;t want the car - my wife did, and rather than have a big fight with her, I thought I%26#039;d just let the loan be denied. It should have been, but wasn%26#039;t!)
How much are you willing to see the unemployment rate rise?
How many businesses go under?
And this is an election year, so we want to keep the economy flowing.
Slowing economy, inflation concerns, softening job numbers, declines in consumer spending, continued concerns about the mortgage markets, weakening dollar. The Fed Statement specifically said %26quot;%26quot;The outlook for economic activity has weakened further. Financial markets remain under considerable stress, and the tightening of the credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters,%26quot; the Fed said in a statement accompanying the decision.%26quot; The market was actually expecting a 1% cut, so its less than expected, the Fed will never raise rates when the economy is struggling, even when inflation is high, specifically because of what happened in the 1970s where rates increased but the economy tanked and unemployment rates soared. The Fed has to walk a tight rope. The current Fed Rate is 2.5% which is still much higher than the low point in 2002. The fed waited a bit to long to start cutting rates, and now they are trying to overcompensate. Personally I think its too little too late, and now they have to appease the markets and keep inflation in check. Keep in mind that Adjusted CPI is 2.3% which in a historical context is relatively low. Unadjusted its 4%, still not particularly high, historically inflation averages about 3-3.5% looking back to 1914. Inflation in the mid 70s and early 80s was close to 13%.
hi,im doing a little research about inflation in the uk,the research is for my university course( events management).i found this piece of text on the national statistics website
CPI annual inflation 閳?the Government閳ユ獨 target measure 閳?was 2.2 per cent in January, up from 2.1 per cent in December.
and a little futher down
As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate in December, at 2.1 per cent, was below the provisional figure of 3.2 per cent for the whole of the European Union.
I am not good with economics and have only started to understand what inflation is, but my question is, is this 2,1 % a good sign for the uk economy? i know this means that some things might get more expensive but doesnt it also mean that wages go up for example?
I honestly dont know much about the UK economy.
but I do know a lot about inflation.
Inflation is good when controlled and kept between bandwidths.
The problem of inflation is this:
1. You dont want it too high - if its higher than the rest of the world, people start asking for payrises and those payrises will reflect prices - therefore your exports in the international market wont be as competitive.
2. You dont want it too low (below 0%) Because if prices are falling, people are putting off spending and therefore the economy contracts - disaster.
But if the UK gov thought they were going to hit 3.2% and they hit 2.1% thats ok - if its above 0% and below about 4% then its good.
The only thing is that if its a trend its not too good. then you%26#039;re looking at something that will keep falling.
The good news to that is the government will encourage you to spend more by offering lower interest rates.
I am admittedly no scholar in mathmatics %26amp; economics but know the basics. My stupid question is on clarifying what inflation means when you read in an article that a country%26#039;s inflation rate is up 7000%? That means that if you made a dollar last January %26amp; could buy a 12oz can of Soda for that dollar %26amp; a year later in January inflation was up 7000% that means that same 12oz can of soda would cost 7000 times more or about 7000 dollars right or is it the opposite. That orginal dollar 12 months ago is larger by 7000x what it is now?. LOL I know I%26#039;m dumb lol.
You are on the right track the first time. However, since the inflation is in percent, you have to drop two zeros. You will need 70 current dollars (or whatever the local currency is) to buy that can. It also probably means that you are being paid close to 70 times now (in the new currency) as much as you were last year. Such an inflation makes it totally useless to put anything into the bank as it will lose its value very quickly. Therefore, banks will not have money to lend to businesses and the industrial base of the country gets destroyed and people lose their jobs. Germany had worse inflation between the wars and the economic destruction enabled a demagogue to take over the country. Under President Carter, we had 21% inflation for a while. That meant that something that cost $100 last year cost $121 now. You could not get a house mortgage or car loan. The other part of the problem was that salaries did not go up to match and the country was in great need of help as his first term came to a close. He was not elected to a second term.
I%26#039;m guessing your wondering about Zimbabwe.
It means that something that cost $1 now costs $70. 7000% is 70x, but I%26#039;m not sure how often it goes. I think it is based on what the value of the currency was a year ago.
No, it is a percentage of 100. If inflation went up 7% then you will spend 7 cents more on the dollar.
I would like to know, does inflatio mean that a certian amount of money was worth more last year then say this year?
for example annual inflation rate is 2%
so 鎷?00 this yr is worth 鎷?00
(inflation at 2 % = 鎷?)
so next year, that 鎷?00 is now worth 鎷?8 ( buts its still 鎷?00 in numbers)
so then does that mean millionaires today will be same as normal ppl in say 100 years as this 2% every year will take over?
no it means that the money is worth less. not that there is less of it
it just meens that money would buy more last year than it would this year, which i guess means that it is worth more
If there%26#039;s 2% inflation in a year, that means that what you could buy last year for $100, now costs $102 for the exact same thing(s).
Yes, if the same 2% inflation rate continues, then what cost $100 this year will cost something like $724 in 100 years from now (100*1.02^100)
Hi!
Inflation is an increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less.
And that definition does not come from me, so I can%26#039;t answer surely for the millionaires, but I think that no. Because inflation isn%26#039;t always constant, it just goes up and down.
I hope it helped you.
