'Inflation' vs 'deflation' according to investment bankers(/economist in their ivory
'Inflation' vs 'deflation' according to investment bankers(/economist in their ivory towers).
re thread (SBY):
Deflation and Inflation: Which is the lesser evil?
Japan was mired in deflation in the last 2 decades, till abenomic took place and started easing. Read that inflation is rising, but disposable income is shrinking.
Which is the lesser evil between the two?
Or have all been misled, that deflation is better after all as compared to inflation.
My understanding is that if inflation is at 2% per year, money will be smaller by 20% in ten years time or am I wrong with this assumption.
May I humbly suggest that for laymen with little policy experience, pls DO NOT START OFF THINKING LIKE published ECONOMIST in order to first build oneself a good, organic foundation in the study of economics/ politics etc.
I.e. DO NOT THINK ABOUT INFLATION/ DEFLATION as published economist think but in terms of how the poor man on the street thinks.
E.g.
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public school/ uni education is Singapore is heavily subsidised (price DEFLATED): this is akin to deflating the price of education so more children can have a good (INFLATED) shot at doing well in life.
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Cigarette prices are legislatively INFLATED as a means to preserve health and as a claw back mechanism since smokers are expected to contribute less income taxes (retire early(Ill health/ stroke)), stay in hospital more (heart attack, diabetes etc)/ DEFLATE the future burden of ill health through a DEFLATED % of active smokers.
- cost of
owning a private car for in Singapore is legislatively INFLATED (COE, ERP, ARF, petrol tax, road tax, parking fees etc) to recognise the premium nature of private transport and to DEFLATE the number of road congestion causing cars around.
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Bus fare/ public transport prices are DEFLATED with the S$1.1 bus service enhancement programme (BSEP) to improve commuter experience so that fewer will depend on private car/ taxi transport and thus DEFLATE overall frequency of road congestion etc.
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Hospital medical care prices are DEFLATED with INFLATED subsidies for C class wards to help less educated/ poorer Singaporeans cope with increasing healthcare costs over the years etc.
- access to
dangerous addictive/hullicinogenic drugs (LSD, heroin etc) is DEFLATED with legislatively INFLATED trafficking penalties such as the mandatory death penalty for drug trafficking etc.
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The reason for Japan's economic stagnation AFAIK is because of its growth bubble >20 yrs ago when greed drove its property prices shot through the roof resulting in widespread demoralisation of society if not an increased rich-poor divide (people who rent become demoralised and prefer to sleep on streets than work to pay escalating rentals).
General inflation favours those who are sly/smart enough to take advantage of it and disadvantages those who just sit on their pile of cash without being aware what inflation is doing to it.
Investment bankers LOVE INFLATION because it allows them MORE REASON to gamble with depositors $$$: these folks thrive on instability: e.g. merger/ acquisition jobs, selling unit trusts, trading I'm futures/ other derivatives etc etc. In the short term, there is increased economic activity since people hand their savings to bankers to invest out of fear of erosion due to inflation, however, in the long term, there might be severe repercussions if the investment is not in socially benificial growth but in unjustified asset price increase/ Potemkin investments like Japan had been in 1990s: only serving to frighten away investors due to stratospheric rental costs: a consequence of inflated (property) asset prices and even larger population of urban poor having squandered their savings on unwise/ reckless investment (as advised by greedy investment bankers that is).
It remains a pity that most Japanese do not have a good understanding of God that mainly comes from the study of Abrahamic religion/ similar and currently consider Shinzo Abe their god and leader (like their emperor in WW2): only time will tell when they will have to find a new god since Abe will surely fail given to the weakness of his structural reforms (if any is to be seen at all): again aggravating the wealth divide which adds to societal problems etc.
So it is better to first look at the items being considered and how the regulation of such prices improves or degrades society rather than using the terms "inflation/ deflation" closely (and recklessly) as economist ought to do because a majority of economists employed/ paid by political parties are there only to give support to a political agenda, paid to justify a private political interest with little concern for the small man in the street.
Only honestly thinking people can/ deserve to demand accountability from dishonest politicians. Thus the need to think of inflation/ deflation in simple, honest, itemised (organic) terms, based upon how it affects the poor man in the street.
Inflation in the access to good through subsidies to 'good' (legislative price deflation) and
Deflation in access to what is evil/ harmful (increases in tobacco tax etc) through inflated prices discouraging access to the tobacco drug.
This is how inflation / deflation should be seen. People on the ground should learn this to demand accountability from economist and politicians hiding in their ivory towers with the golden question: is the quality of life of poor individual IMPROVING OR DETERIORATING. That is much more important than pie in the sky definitions of 'inflation'/ 'deflation' when the basket of good in respect of such pronouncements is yet publicly defined let alone agreed upon.
Communism was one eminent economic theory/ system of thought, yet time revealed its ponzi elements: revolutionaries: mainly stressed-out trouble makers who stole power by promising the moon if not the sun, only to follow the tyrannical ways of whom they overthrew once themselves gained power. Abenomics will follow somewhat in this shadow, given the vagueness of 'structural reforms' that Mr Shinzo Abe promises, which untill now seems to only benefit the rich, making Mr Abe very likely to be voted out due to his neglect of the very poor he ought to uplift.
