What inflation can lead to?
@Professor2010 (20162)
India
October 23, 2010 4:59am CST
Friends, inflation is there in all countries. 
If you think that the current economic crisis is something that has never happened in history before, you may be wrong. After the collapse of the agriculture sector in Zimbabwe in 2000, the inflation in that country skyrocketed to 231 million percent a year. Just think about it – 231,000, 000%. Unemployment went up to 80% and a third of country's population left it.
[i][b]Printing currency notes does not solve problem. 
Here in India, what I know is, gold is deposited in the reserve bank always against the currency notes in circulation in the country. If it is not done, the currency note is just a piece of paper.
See this 100 billion dollar note, it can buy just THREE eggs there.[/b][/i]One 200 000 dollar note equals less than $0.10 cents, in December 22nd, a new note of 500 000 dollars introduced to the market, Next - 750 000 dollars, and in January - new note of 10 million dollars.
A US $10 dollar note is 10 times worth more than the 10 million dollars Zimbabwe note.
A case full with 65 billion Zimbabwe is equal to $2000 US dollars. What a pity?
The exchange rate is approximately, 25 million Zimbabwe dollars for 1 US dollar.
Next 50 Million notes were introduced, next is 250 million dollars note.
Just imagine an ordinary T shirt costs, only about 3 billion dollars.
In May - a note of 500 million dollars is introduced, in June - note worth 25 and 50 billion are printed.
And finally - 100 billion dollars note!!!!
In August, the government devalued Zimbabwe dollar by removing 10 zeros from notes.
What is situation in your place, what can be bought for 100 dollars or 100 units of your currency?
Here in my place in India a 100 rupee note can buy any one of the following, 1.8 liters of petrol for my scooter, 500 grams of chicken, 400 grams of goat meat, 2 kilograms of fresh cauliflower, 2 kilograms of white scented rice, 8 kilograms of potato, 4 kilograms of onion, 2 bottles of 1 liters coke, or a plane non-vegetarian meal in a road side hotel, if you are hungry..
Also comment on the global inflation scenario.
Professor
If you think that the current economic crisis is something that has never happened in history before, you may be wrong. After the collapse of the agriculture sector in Zimbabwe in 2000, the inflation in that country skyrocketed to 231 million percent a year. Just think about it – 231,000, 000%. Unemployment went up to 80% and a third of country's population left it.
[i][b]Printing currency notes does not solve problem. Here in India, what I know is, gold is deposited in the reserve bank always against the currency notes in circulation in the country. If it is not done, the currency note is just a piece of paper.
See this 100 billion dollar note, it can buy just THREE eggs there.[/b][/i]One 200 000 dollar note equals less than $0.10 cents, in December 22nd, a new note of 500 000 dollars introduced to the market, Next - 750 000 dollars, and in January - new note of 10 million dollars.
A US $10 dollar note is 10 times worth more than the 10 million dollars Zimbabwe note.
A case full with 65 billion Zimbabwe is equal to $2000 US dollars. What a pity?
The exchange rate is approximately, 25 million Zimbabwe dollars for 1 US dollar.
Next 50 Million notes were introduced, next is 250 million dollars note.
Just imagine an ordinary T shirt costs, only about 3 billion dollars.
In May - a note of 500 million dollars is introduced, in June - note worth 25 and 50 billion are printed.
And finally - 100 billion dollars note!!!!
In August, the government devalued Zimbabwe dollar by removing 10 zeros from notes.
What is situation in your place, what can be bought for 100 dollars or 100 units of your currency?
Here in my place in India a 100 rupee note can buy any one of the following, 1.8 liters of petrol for my scooter, 500 grams of chicken, 400 grams of goat meat, 2 kilograms of fresh cauliflower, 2 kilograms of white scented rice, 8 kilograms of potato, 4 kilograms of onion, 2 bottles of 1 liters coke, or a plane non-vegetarian meal in a road side hotel, if you are hungry..
Also comment on the global inflation scenario.
Professor3 people like this
9 responses
@getbiswa2000 (5544)
• India
23 Oct 10
Hello,
What a coincidence. I just wrote an article on Reserve Bank of India monetary policy http://www.bukisa.com/articles/379650_the-reserve-bank-of-india-monetary-policy yesterday and here I am commenting on inflation. The Reserve Bank of India has the sole power to print currency notes. But they can't just do it anytime they wish. Generally they print money for to fill up the deficit in budgets. Suppose the government is short on funds to pay up its employees or may be it has pledged some investments for which it doesn't have enough money. In such a situation it will sell some securities, bonds to RBI. The RBI in return will issue currency according to Minimum Reserve System. The Government will get the money and spend it to pay up the salaries of its employees or in its developmental projects. In other words the money that has been issued adds up to the money supply in the economy. This will also add up to inflation. RBI has a few very effective instruments to suck liquidity out of economy. Experts say that a slight inflationary trend is good for the overall development of a country and also to maintain trust in business. But too much inflation is always bad. High inflation means high purchasing power of individuals which will result in high competition for resources which is limited. This will lead to price rise, unemployment and other malaise. Thanks.
God bless you.
2 people like this
@Professor2010 (20162)
• India
24 Oct 10
Thanks for the detailed response and sharing the link, i have checked that..
Professor. . Cheers
@Hatley (163776)
• Garden Grove, California
23 Oct 10
hi professor here in the Us the jobless situation a nd the rise in the cost of living has created a really poor economy. a lot of smaller business who depended on working people to buy their products
have gone out of business.Meals that used to cost maybe five or six dollars are more like eight to ten dollars. Rents that were 799 are now 
and wife and even older children just to be able to pay the rent.Sometimes young working people will double up to be able afford a one bedroom apartments. So I can well imagine the effects this all has on world economy. Even here in Gold Crest my room and board per month here paid thank God from my social security check and SSI checks is $981 per month. If I did not have the SSi check for people who are physically handicapped I could not afford to live here.Just a few years back jobs were plentiful and the cost of living was so much better, its scary now things managed to change so much and so badly. My son was out of work for one year and a half . he now has a job but its only thirty hours a week. we are hoping that in awhile they will give him full time employment there. i
and wife and even older children just to be able to pay the rent.Sometimes young working people will double up to be able afford a one bedroom apartments. So I can well imagine the effects this all has on world economy. Even here in Gold Crest my room and board per month here paid thank God from my social security check and SSI checks is $981 per month. If I did not have the SSi check for people who are physically handicapped I could not afford to live here.Just a few years back jobs were plentiful and the cost of living was so much better, its scary now things managed to change so much and so badly. My son was out of work for one year and a half . he now has a job but its only thirty hours a week. we are hoping that in awhile they will give him full time employment there. i 1 person likes this
@Hatley (163776)
• Garden Grove, California
23 Oct 10
when I posted this it left out part of a sentence
Rents that were
a sentence was partly left out, Rents that were 799 are now 1200 and 1300 and these are not super duper deluxe but older apartments with things that needed replacement. Now husbands and wives and even older children have to work just to be able to the pay the rent. sorry about that, my computer is acting up. lol.
4
1 person likes this
@Professor2010 (20162)
• India
24 Oct 10
I am really sad to hear this dear Hatley madam, i thought people in america earn much, don't have job problem!!
Thanks for making things clear.
Professor. . Cheers
@Professor2010 (20162)
• India
24 Oct 10
So price rise and iflation is globl
Thanks for sharing.
Professor. . Cheers
@joey_matthews (8354)
•
23 Oct 10
I don't see why things can't stay the same or near as, I know it's normal for things to increase but food tends to go down while bills goes up. I would of thought it would be more common sense for things to be priced upon reflection and that might keep the cost of things becoming to high.
The UK are having trouble getting the pound back to where it was, I really hope at some point it returns to what it was before but with all these cuts coming I can't see it.
1 person likes this
@Professor2010 (20162)
• India
24 Oct 10
Thanks for sharing about your place friend.
Professor. . Cheers
@tigeraunt (6326)
• Philippines
24 Oct 10
dear professor,
an increase in the general level of prices implies a decrease in the purchasing power of the currency. when the level of prices rise, the monetary unit could only buy a few things and pay services. inflation is not evenly distributed in the economy. for example, banks who are paid a fixed rate of interest on loans will lose the purchasing power of their interest earnings while on the other hand, the borrowers benefit.
here in our country, the peso is doing well now as against a few years back when $1 is equivalent to nearly Php68 (philippine peso). the exchange rate now is $1 = Php43.
i say it is a little better nowadays. but for family who have 5 to 8 and up children, i dont know how they are able to stretch their resources. with so many children being born as of today, i dont know how they will be able to find jobs in the future when now there are less jobs already for the people here. the government has to work on that!
ann
here in our country, the peso is doing well now as against a few years back when $1 is equivalent to nearly Php68 (philippine peso). the exchange rate now is $1 = Php43.
i say it is a little better nowadays. but for family who have 5 to 8 and up children, i dont know how they are able to stretch their resources. with so many children being born as of today, i dont know how they will be able to find jobs in the future when now there are less jobs already for the people here. the government has to work on that!
ann
1 person likes this
@tigeraunt (6326)
• Philippines
24 Oct 10
hi professor,
it means that a filipino can buy dollar at a lower price. example, if the government will purchase oil from america, the philippines will be able to purchase a barrel and a little more than what it use to buy. if it buys a barrel of oil for example, at $1 (Php68)before, now its cost will only be Php43 to $1. the government will be able to save Php25 per barrel.
ann
@Professor2010 (20162)
• India
24 Oct 10
Anny dear
My knowledge in economics is poor, hence i get puzzled, previouly you got 68 peso for one us $, now just 43, and you say peso is doing well?
Thanks for sharing in details.
Professor. . Cheers
1 person likes this
@thommas (143)
• Latvia
23 Oct 10
Oh, my Guard, three eggs for 100 billions? It's hard to believe it.
Thanks, Professor, for your post, that was very interesting to read about the consequences of inflation because in my country last to years we experienced a quite opposite process - deflation. Though it was very small, around a couple of percent, it had a very symbolic meaning because we hadn't had deflation for an eternity. It was caused by an experimental decision of our government to try to get out of crisis without devaluation of currency despite the fact the most of countries around us did it. Deflation provoked a rise of unemployment as well as one of the previous commentators said that the inflation lead to it.
In my opinion, inflation or deflation can't be bad phenomenons by themselves, "a priory". They are always just consequences of economic processes and politics like symptoms of illness. I'm more than convinced that besides the rise of prices you mentioned, Professor, you kept in secret that there was also a rise of salaries and wages as well. Of course, salaries never follow the increase of prices fast enough but that's a fact that they always follow.
@Professor2010 (20162)
• India
24 Oct 10
Hi thommas
Welcome to mylot and my posts, yes salary, wages do increase, but never in tune with infltion, when i joined as a lecturer long back in 1968, i got 345 per month, when i retired it was 45, 000 plus, but that 435 was more compared to 45000, so far as buying power and family expenses are considered..
Thanks for sharing.
Professor. . Cheers
@dorannmwin (36392)
• United States
26 Oct 10
Well, I am in the United States and I just went grocery shopping today. I spent 55 dollars and bought the main entrees and sides for dinner at our house for the next five days, 8 cans of food for my cats, a bottle of dish detergent, two dish sponges, a gallon of milk, chocolate syrup for the kids to have chocolate milk, and some different things for us to eat for lunch. I did go to the discount grocery store because of the fact that I like to save money where I can, but I would still say that the US dollar does go pretty far.
@vandana7 (100617)
• India
24 Oct 10
Professori - we must first check the black monies. If we can control that, we would then be able to devise correct policies. As things stand, black money is simply too much in our country. We could run a parallel economy with it! It also finances terrorism. Till we address this menace, merely tackling inflation does not make sense, because there are plenty of people out there who will get crushed if RBI were to take stern steps. Not everybody gets black money you know.
