Inflation, expansionary influence, governments
One of the most striking differences between modern inflation and the past is that, in times gone by, the inflationary peaks were followed by long, slow deflationary declines when both prices and money wages fell, especially in times of recession. It was not uncommon in the early years of this century, a great company announced a general cut in wages. In fact, it happens often during the Great Depression. It is true that prices often declined, partly as a result of technological advancement and also in part by the sporadic outbreak of unbridled competition.
A third change is also visible throughout the Western world in Japan. We refer to the much wider role of the public sector plays in generating demand. This change occurred because governments in all capitalist nations are today taking responsibility they never had before, the responsibility to promote growth in the extent possible and to ensure adequate levels of social welfare.
[...] Behind the process of inflation Numerous individual factors have contributed to the rise in prices. The peculiarly inflationary financing of the Vietnam War was one of them. Another was the OPEC oil crisis of 1973. Still another was the global crop failures that year. But these causes seem more trigger the inflationary potential of the world to bear the full responsibility for inflation. To account for such widespread and so persistent phenomenon on the overall inflation, we must seek changes of great depth and breadth. [...]
[...] In fact, it happens often during the Great Depression. It is true that prices often declined, partly as a result of technological advancement and also in part by the sporadic outbreak of unbridled competition. The expansionary influence of governments A third change is also visible throughout the Western world in Japan. We refer to the much wider role of the public sector plays in generating demand. This change occurred because governments in all capitalist nations are today taking responsibility they never had before, the responsibility to promote growth in the extent possible and to ensure adequate levels of social welfare. [...]
[...] The tendency to accelerate The third, the most dangerous is the tendency of the inflation acceleration. The inflation accelerates because prices continuously increasingly directly generate further price rises, through its effects on behavior. INFLATION CONTROL Certainly we would know how to deal with inflation a war broke out tomorrow, threatening a high rampant in price levels. In that case would freeze all prices and importaríamos heavy taxation to wipe all income excesses. Many problems could arise in the wake of such a policy, but inflation would certainly not be one of them. [...]
[...] Erosion of monetary assets There are many reasons, the first is that inflation exerts strong pressure on the value of monetary assets. The real assets, such as houses, can gain in value; in fact inflation triggers typically increases in real estate values the values goods. Bankruptcies The second is that inflation will cause widespread insolvency and business failures. This makes business become too expensive for industries like construction or public utility services, which depend substantially on loans to finance their operations. [...]
[...] Retirement for old age, unemployment insurance, social security payments and health insurance (in most nations) has attenuated very extreme risks to which most individuals was subject in the era of laissez-faire capitalism. Such attitudes can be deplored. Are expressions of a democratization of social life, the disappearance of old concepts that assumed that the most humble professions should know their place. But it behooves us also recognize the consequences of this change. The old hierarchy of power or privilege had profoundly stabilizing influence on economic behavior. The new order of free competition has profoundly destabilizing influence. [...]
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