Inflation Can Haunt You, Pun Intended…

This is a great story from Asia. It helps us remember what Milton Friedman worked so hard for. That was for governments to lower inflation. People often think that any rise in price is inflation. Inflation is nothing but a monetary phenomenon and to normal citizens, it means that it is just the amount of money that the government prints. Most try to print as much as they grow, if they print more than they grow the more we have inflation. Now to the story:

“August is the month when Buddhists provide the hungry ghosts of the dead with food and wine and cigarettes and paper offerings that represent the good things in life – cars, houses, motorbikes, stereo sets, fancy suits of clothes.

But like everything else in Vietnam, these brightly colored offerings have risen steeply in price and shopkeepers say people are buying fewer gifts to burn for the dead than ever before.

With inflation rising to 27 percent last month – the highest in Asia – and food prices rising to 74 percent above those a year earlier, Vietnam is suffering its first serious downturn since it moved from a command economy to an open market nearly two decades ago.”

The only thing that can cure inflation is to stop printing money. This is hard for governments because they can use the money to buy things to help themselves or their people and not feel the effects immediately of throwing that money in.

The rest of the story is here.


Published in: on August 21, 2008 at 9:28 pm  Leave a Comment  
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