Economy and Society

The article you transcribe the end of this comment conveys a very didactic explanation of stagflation, however, as the economy is not an exact science due to the human component of it, I believe that the current stagflation is "a very human component "which is not contained in that article that refers to one of the Deadly Sins that neoliberalism has encouraged more ... the GREED!.

As I have written repeatedly, the economic laws that the good of Adam Smith gave us were based on observations made in relation to the society in which they lived, but that society is not the same society that exists in the century Current XXI which have lost a lot of moral values.

Applying the ratio [common sense] and those economic laws, to the fall in consumption [claim] because we are seeing a clear stagnation of the economy should be a price drop, but not so. Why?.

For me, the answer has no doubts .... By the greed of businessmen that despite the declining demand and therefore sales, existing as recession prices rise because they want to receive, at least the same benefits. At this point it is clear that the "free market? has become a farce.

Do not forget for one moment that prices are not only governed by the binomial demand-supply, but there is a component of "personal" of the employer who will decide the amount of benefit you get with their products. It is therefore that inflation does not always and not only is produced by a target pressure of demand, but by a decision "human" owner of the goods.

That said, spreading a falsehood often unhealthy, probably as an excuse to hide this, saying that wage increases cause inflation [is curious that the two components of production, CAPITAL - WORKING, only the latter produces inflation; Are profit margins that are applied to products not influence it?]. That might be so, perhaps, the most developed countries [I have never believed that salary increases are proportional to the effort if the component "work" in production, causing inflation and an increase in demand due to increased purchasing power should lead to increased supply and therefore prices should remain stable], but in underdeveloped countries where wages are subsistence, and therefore purchasing power is at its lowest level, this assertion is nonsense it only seeks to increase corporate profits via the quasi-slave labor.

Remember that the relocation of enterprises with famous globalization does not occur in a capricious because the adventurous spirit of the owners thereof; occurs precisely because the search for cheaper labor to provide a increased income statements of companies.

Of course that tactic in the long run, resulting in a decrease in purchasing power in countries of origin of such companies, which are, in turn, the countries of destination of goods produced in other places as entrepreneurs are delocalized to produce but do not want to be to sell their products [a shirt that costs them $ 5 where they sell produce at $ 50 in their own countries]. This decrease in purchasing power, which is currently being displayed by an obvious increase in unemployment in most developed countries, is causing a slump in sales and thus many companies facing serious financial difficulties, which also begins Displayed with increasing bankruptcies and defaults [see].

Miguel de Arriba

In the tightrope of stagflation

Stagflation English-tracing "stagflation" word made from "stagnation" (stagnation) and "inflation" (inflation) indicates the time or economic conditions that, in an inflationary situation, there is a stagnant economy and the rate of inflation does not yield. According to some economic observatories, this is because the box with Spain, one of the most difficult to address.

Stagflation is a term that was coined in 1965 by former British finance minister, Ian McLeod, who, in a parliamentary speech made the following definition: "It is the economic situation shows the simultaneity of rising prices, rising unemployment and economic stagnation, entering a crisis or even recession.

Spain is not technically in recession, a situation that requires chain two consecutive quarters of negative growth, but it is the edge of the "zero growth", according to the semi-official estimate yesterday predicted the Bank of Spain, which usually coincides with the official National Institute of Statistics. With inflation above 5 percent and now unabated, the diagnosis is close to the "stagflation, considered one of the worst possible economic scenarios for the difficulty of their management and correction. Monetary and fiscal policies that are often used to boost an economy recession worsen the inflation component of stagflation and restrictive monetary policies that are used to combat inflation tend to deepen and broaden its recessive component.

Stagflation completely distorts markets and places to governments and central banks in a delicate position. In the stagflation recession is usually partial, recording simultaneously the decrease of some sectors such as production of goods, together with the growth of other sectors such as production services. If it is a relatively open economy and inflation is accompanied by a process of devaluation, you can register a contraction of the currency-consuming activities and an expansion of generating foreign exchange. This represents an enormous challenge for authorities as they receive mixed and contradictory signals about the economy that make it very difficult to decide what policies to implement, in what sequence and when to take them. "It's the worst of both worlds" say many economists.

While recessions may have internal or external causes, stagflation is always home made "inflation is always and everywhere a monetary phenomenon" and those who handle the coins are sovereign monetary authorities of each space. In the Spanish case, as for the entire euro zone, the monetary authority is not national but European Central Bank (ECB), whose original mandate is to combat inflation. Monetary policy is beyond the scope of government. The other basic tool of economic policy, fiscal, is also limited by the Community obligations of budgetary stability.

In any case, stagflation becomes a dilemma for the authorities to manage the cash flows themselves, who must choose between the measures normally used to increase economic growth and thus increased, inflation or policies to combat inflation reduced activity in an economy where unemployment situation. A clear example: the strategy of reducing interest rates is generally indicated to revitalize consumption and investment and thus may help to overcome economic stagnation, yet repotencia inflationary pressures. Another case: raising rates, as has been done since 2005, the ECB can help to contain inflation, but restricts the expansion of growth.

Source: The New Spain

A clear example of the greed that promotes the economic system can be seen in images downloading this file ...

Download link: Trabajo_Globalizacion.pps (2.31MB) Added on: 22/08/2008 Clicks: 627

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Tags: Author of blog, Neoliberalism, Recession

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