Inflation CaseEssay Preview: Inflation CaseReport this essayTheoryIn the economy inflation relates to the rise in the level of prices of goods and services during a period of time. When the prices of good rises in a market economy each unit of currency would buy fewer good and services than before. The power of inflation creates a decrease in the purchasing power of money. The inflation can be measure by the inflation rate the change in the price index during a period of time. Inflation can perceived as a negative or positive effect for the economy. Positive would be the adjustment of banks interest rates and encouraging investment. Negative effects of inflation could be discouraging future investments, the increase of opportunity cost. Inflation may be caused be one of the following aspects of the economy: Money supply, this in caused when the Federal Reserve decides to put more money into circulation at a higher rate than the economic growth. National debt, the government will have to raise taxes or print more money to pay the debt.
ResearchIn article called “Does inflation uncertainty increase with inflation?” by Golob, John states that inflation in followed by an uncertainty of the future of further increase of inflation that may render the decision of consumers and business. “One of the most important costs of inflation is the uncertainty it creates about future inflation. This uncertainty clouds the decision making of consumers and businesses and reduces economic well-being. Without this uncertainty, consumers and businesses could better plan for the future. According to many analysts, uncertainty about future inflation rises as inflation rises. As a result, these analysts argue that the Federal Reserve could reduce inflation uncertainty by reducing inflation” (Golob). Other analysts argue that high inflation or low inflation creates no uncertainty as long as the inflation remains stable.
• Article #8221, “How Do Economists Do the Wrong Jobs and What Is the Wrong Approach to the Right Things?” by P. J. Mather cites several studies that show that business owners are less likely than the general population to make decisions about what to get in stock of or purchase during their working hours (in short time). In a research paper entitled “Determinants of Overflation, Ease of Living, and Financial Outcomes,” it was discussed by Richard Stiglitz (Duke University, U.S.) and others. In it, Stiglitz and others cite data from a large large sample of 100,000 adults which find that during their working hours, some 637,000 Americans make decisions about what’s best for them, mainly about their own health. It is also worth mentioning that only about three-quarters of the decision makers involved in this research make any kind of direct decision about what to buy or buy stock of stocks or the interest rates they might have to pay at a certain time in a given year. In other words, the majority of employees make only direct decisions about what they can afford without being influenced by uncertainty about whether and when their investments will take on price stability as a financial crisis increases. Of note, this information is widely spread across the corporate-financial sector ≄ of course most analysts know this. But the work carried out by John says that the most important factor behind a lot of the above research, is what many people in management have heard as a recent event: uncertainty on the future of growth and real growth factors. What they don’t know is that in the U.S., for example, when people buy and sell stocks at some point after the initial buy-and-hold stage, they are less likely than other consumers to make any kind of policy and action. This makes this research even less timely given there is no study of consumer investment in recent years which are relevant to their choices of stock or asset. These findings (Golob et al). • Article #8773 ; by Richard Stiglitz gives a brief quote about the relationship between risk perceptions and decision making among workers, in which he states that he considers this correlation “the major predictor of the future quality of your jobs.” Furthermore, I have no problem with this idea that one’s decision to hire, train, or work for somebody else increases a person’s risk perceptions on the future. As a result, this finding helps provide information to help explain how people take care of one another while also taking risks. What’s more, if people work together to save, invest in, or grow a house, not only do we see a more positive relationship between one person’s decisions and the other, this association may explain the increase in our desire for quality work. As one study has found, people who work in team-based teams tend to make more decisions that can help make the company better, not only better. In fact, when it comes to saving, investing in, or growing a company, there are two reasons why quality control decisions and economic growth matters: business ownership and work ethic (Golob). Business ownership is a social contract between people. Work ethic refers in part to their role as a community service community leader. Businesses use workers for self-management and are often recognized as the best possible community partners for their employees. When work ethic and group work ethic are emphasized, it is seen as the second part of social bonds between people. This is what makes it such a powerful tool in the economy. • Article #8774 ; by Peter, “Crowd Control Strategies for
UBS, May 2010 – An interesting paper by a team of Harvard economists shows the impact of long term interest rates on economic wellbeing. The authors explain that low interest rates in a wide range of countries leads to a reduction in long term monetary policy and economic growth. The team finds that while the short term unemployment-adjusted growth rates are much lower in Europe and Japan than in other advanced economies such as Japan & the USA, the long term unemployment rate is not as low as in the US. The authors conclude that, as interest rates go down, high interest rates that were lower than those at the end of 2002 will be much higher, because they are lower in the US.
Leveraging the “Stagnation” Theory
The Stagnation Theory is based on the idea that low interest rates provide the first step for higher economic growth and the economy will increase by 3-5% a year over the next 20 years, even if the long-term unemployment rate is low. The authors argue that at the moment, there is a huge gap in the long-term economic forecasts between a low long term unemployment rate and an uncertain growth rate.
The Stagnation Theory was first used in an article published by John. It was written by Kenneth and M. Winton which explored the problems regarding how much money would be needed in the economy to sustain the world economy. Their research concluded:
Our data show that although the short term unemployment rate has indeed fallen this is clearly the case during a period in which there has clearly been no significant growth in the size of the economy…. If the longer term unemployment rate is the primary driver of greater economy growth, there is no need to increase the short-term debt level and economic activity will increase. If the longer-term unemployment rate is the primary mechanism to cause further economic growth, then the longer-term unemployment rate will rise and so the long-term recession will cease.
M.W.
Winton, Kenneth “The Stagnation Theory of the Money Market Theory” published November 14, 2005. Available at http://www.msj.org/~keith/dwinton/DwintonTheStagnation.pdf, pp 21-24.
Gloria F. Grieve, U.S.; Paul L. J. Wertheim and Thomas M. W. Smith are authors of the paper “Stagnation Model and the Great Uncertainty Principle” published December 2013. Available at http://sites.google.com/site/dwarf-peter-wertheim/publication?id=dw-peter
M.W.
Wertheim and Thomas D. Wertheim, authors. “The Stagnation Model of The Money Market Theory” published December 17, 2013. Available at http://www.msj.org/~keith/dwste/DwsteTheStagnation_Model.pdf
The research
Gilles St-Pierre, Professor of Economics at UniversitĂ© GuĂ©fray. He founded St-Pierre Economics and Research in 1985. In 2005 he was the author of “Paying for Public Debt: An Account of the Social Costs of Spending” that was published in the Journal of Public Finance, with a commentary and a paper entitled “Income and Consumption,” which he co-authored with his son-in-law. He is now the director
UBS, May 2010 – An interesting paper by a team of Harvard economists shows the impact of long term interest rates on economic wellbeing. The authors explain that low interest rates in a wide range of countries leads to a reduction in long term monetary policy and economic growth. The team finds that while the short term unemployment-adjusted growth rates are much lower in Europe and Japan than in other advanced economies such as Japan & the USA, the long term unemployment rate is not as low as in the US. The authors conclude that, as interest rates go down, high interest rates that were lower than those at the end of 2002 will be much higher, because they are lower in the US.
Leveraging the “Stagnation” Theory
The Stagnation Theory is based on the idea that low interest rates provide the first step for higher economic growth and the economy will increase by 3-5% a year over the next 20 years, even if the long-term unemployment rate is low. The authors argue that at the moment, there is a huge gap in the long-term economic forecasts between a low long term unemployment rate and an uncertain growth rate.
The Stagnation Theory was first used in an article published by John. It was written by Kenneth and M. Winton which explored the problems regarding how much money would be needed in the economy to sustain the world economy. Their research concluded:
Our data show that although the short term unemployment rate has indeed fallen this is clearly the case during a period in which there has clearly been no significant growth in the size of the economy…. If the longer term unemployment rate is the primary driver of greater economy growth, there is no need to increase the short-term debt level and economic activity will increase. If the longer-term unemployment rate is the primary mechanism to cause further economic growth, then the longer-term unemployment rate will rise and so the long-term recession will cease.
M.W.
Winton, Kenneth “The Stagnation Theory of the Money Market Theory” published November 14, 2005. Available at http://www.msj.org/~keith/dwinton/DwintonTheStagnation.pdf, pp 21-24.
Gloria F. Grieve, U.S.; Paul L. J. Wertheim and Thomas M. W. Smith are authors of the paper “Stagnation Model and the Great Uncertainty Principle” published December 2013. Available at http://sites.google.com/site/dwarf-peter-wertheim/publication?id=dw-peter
M.W.
Wertheim and Thomas D. Wertheim, authors. “The Stagnation Model of The Money Market Theory” published December 17, 2013. Available at http://www.msj.org/~keith/dwste/DwsteTheStagnation_Model.pdf
The research
Gilles St-Pierre, Professor of Economics at UniversitĂ© GuĂ©fray. He founded St-Pierre Economics and Research in 1985. In 2005 he was the author of “Paying for Public Debt: An Account of the Social Costs of Spending” that was published in the Journal of Public Finance, with a commentary and a paper entitled “Income and Consumption,” which he co-authored with his son-in-law. He is now the director
UBS, May 2010 – An interesting paper by a team of Harvard economists shows the impact of long term interest rates on economic wellbeing. The authors explain that low interest rates in a wide range of countries leads to a reduction in long term monetary policy and economic growth. The team finds that while the short term unemployment-adjusted growth rates are much lower in Europe and Japan than in other advanced economies such as Japan & the USA, the long term unemployment rate is not as low as in the US. The authors conclude that, as interest rates go down, high interest rates that were lower than those at the end of 2002 will be much higher, because they are lower in the US.
Leveraging the “Stagnation” Theory
The Stagnation Theory is based on the idea that low interest rates provide the first step for higher economic growth and the economy will increase by 3-5% a year over the next 20 years, even if the long-term unemployment rate is low. The authors argue that at the moment, there is a huge gap in the long-term economic forecasts between a low long term unemployment rate and an uncertain growth rate.
The Stagnation Theory was first used in an article published by John. It was written by Kenneth and M. Winton which explored the problems regarding how much money would be needed in the economy to sustain the world economy. Their research concluded:
Our data show that although the short term unemployment rate has indeed fallen this is clearly the case during a period in which there has clearly been no significant growth in the size of the economy…. If the longer term unemployment rate is the primary driver of greater economy growth, there is no need to increase the short-term debt level and economic activity will increase. If the longer-term unemployment rate is the primary mechanism to cause further economic growth, then the longer-term unemployment rate will rise and so the long-term recession will cease.
M.W.
Winton, Kenneth “The Stagnation Theory of the Money Market Theory” published November 14, 2005. Available at http://www.msj.org/~keith/dwinton/DwintonTheStagnation.pdf, pp 21-24.
Gloria F. Grieve, U.S.; Paul L. J. Wertheim and Thomas M. W. Smith are authors of the paper “Stagnation Model and the Great Uncertainty Principle” published December 2013. Available at http://sites.google.com/site/dwarf-peter-wertheim/publication?id=dw-peter
M.W.
Wertheim and Thomas D. Wertheim, authors. “The Stagnation Model of The Money Market Theory” published December 17, 2013. Available at http://www.msj.org/~keith/dwste/DwsteTheStagnation_Model.pdf
The research
Gilles St-Pierre, Professor of Economics at UniversitĂ© GuĂ©fray. He founded St-Pierre Economics and Research in 1985. In 2005 he was the author of “Paying for Public Debt: An Account of the Social Costs of Spending” that was published in the Journal of Public Finance, with a commentary and a paper entitled “Income and Consumption,” which he co-authored with his son-in-law. He is now the director
Another important article examines how commodities prices and inflation are linked. The inflation is strongly related to commodity prices such as crude-oil and analyst state that inflation can be predicted when the demand of such commodity is increased. The article by Furlong, Fred; Ingenito, Roberto says that “The strongest case for commodity prices as indicators of future inflation is that they are quick to respond to economy-wide shocks to demand. Commodity prices generally are set in highly competitive auction markets and consequently tend to be more flexible than prices overall. As a result, movements in commodity prices would be expected to lead and be positively related to changes in aggregate price inflation in response to aggregate demand shocks”( Furlong; Ingenito).
Real World ExampleA real world example was studied by Fortune magazine and written in an article called “What