Eassy on Inflation with quotations for Class 10 & 12

 

INFLATION (PRICE HIKE)

“MONEY IS POWER, FREEDOM, A CUSTION, THE ROOT OF ALL EVILS, THE SUM OF BLESSINGS.”

Inflation means a general increase in price or increase in the supply of money. Inflation is a board, variable and complex term. Only economists can have its better comprehension from economic point of view. It is hard to understand its various kinds for a layman.

Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.

There is “Creeping Inflation”. It is a healthy trend as it increases development. “Walking inflation” affects savings. “Running Inflation” is hard to control. It affects consumption and savings. It leads to economic recession “Galloping or Hyper Inflation” is disastrous and fatal to economy. “Demand-pull” inflation is because of aggregate demand of a commodity. “Cost Push Inflation” occurs when cost of production increases.

Inflation destroys savings, impedes planning, and discourages investment. That means less productivity and a lower standard of living. – Kevin Brady

Inflation is not an unexpected and unpredictable phenomenon. Its seeds are sown because of mismanagement; weak or low market knowledge, indifferent attitude towards economic indicators, weak administrative machinery, absence or lack of check and balance, bureaucratic manipulation, inadvertent boarding and strong association of the market leaders. Disturbance in demand and supply ratio is yet another factor.

“Whoever controls the volume of money in our country is absolute master of all industry and commerce… when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.”

James A. Garfield

Inflation is a menace in the poor or under developed or developing countries. It badly affects life standard of the people. It increases poverty and decrease purchasing power. Inflation creeps slowly economy into economic system and assumes magnitude by creating an alarming situation. Inflation destroys or disturbs market balance badly. 

“The individualist insists that drastic depressions are the result of credit inflation; (not excessive savings, as the Keynesians would have it) which at all times in history has been caused by direct government action or by government influence. As for aggravated unemployment, the individualist insists that it is exclusively the result of government intervention through inflation, wage rigidities, burdensome taxes, and restrictions on trade and production such as price controls and tariffs. The inflation that comes inevitably with government pump-priming soon catches up with the laborer, wipes away any real increase in his wages, discourages private investment, and sets off a new deflationary spiral which can in turn only be counteracted by more coercive and paternalistic government policies. And so it is that the "long run" is very soon a-coming, and the harmful effects of government intervention are far more durable than those that are sustained by encouraging the unhampered free market to work out its own destiny.”

― William F. Buckley Jr.

Inflation increases unemployment and, as result, not only skilled but also unskilled workers laid off. It creates future social problems. It permeates into our social fabric and disturbs everything. Anxiety and depression are the immediate outcomes of inflation. It eats up purchasing capacity of people. It belittles the efforts done by the bread earners to meet growing needs of their families. Inflation gives rise to dishonesty and corruption.

“Mere inflation-that is, the mere issuance of more money, with the consequence of higher wages and prices-may look like the creation of more demand. But in terms of the actual production and exchange of real things it is not.”

Henry Hazlitt

There is a popular belief that once prices increase, they never decrease. It is true to some extent. However, we can minimize effects of inflation by concentrated efforts. Inflation can be controlled by a long term and short term sound economic planning. Market competition can bring about reduction in inflation. Local industry should be promoted to reduce inflation. 

“Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output… A steady rate of monetary growth at a moderate level can provide a framework under which a country can have little inflation and much growth. It will not produce perfect stability; it will not produce heaven on earth; but it can make an important contribution to a stable economic society.”

Milton Friedman

Accessible and cheaper goods can minimize the adverse effects of inflation. These can also provide people with alternatives. This may affect the standard of living but people are protected against adverse effects of inflation. Proper monitoring and regulatory control can help in reducing inflation. Retailers and hawkers sell things of daily use at their own will. They do so because there is no check and balance. There is nobody to enforce law and evaluate the prices at which things are sold.

“Whomsoever controls the volume of money in any country is absolute master of all industry and commerce and when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.”

― James Garfield

Inflation can be viewed as an international phenomenon. Only sound planning by the Government can avert it. Inflation is a misery and people can be saved from this misery through mutual effort. To sum up, inflation, in any form, undermines the very foundations of a social set-up. It makes the rich richer and the poor poorer. It carries the social stigma that breeds dissatisfaction among all the factions of a society. The government should take adequate measures to control this social evil.

“A once-and-for-all increase in prices due to low-end workers finally seeing their wages catch up to historical productivity increases is a desired policy outcome, not something to be avoided. Thereafter, the goal would be for wages to stay roughly par with productivity, thereby creating price stability.”

― John T. Harvey