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and found governments The countries themselves are faced with limited options, given the external origin of the crisis, as it is mainly caused by the Corona epidemic, an emergency health condition that was not expected, in addition to the ongoing war in Ukraine and the confusion it caused in the world.oil driver and export of grain.
And while the picture looks so dark, take Federal Reserve Board The US Central Bank, which is equivalent to the Central Bank, decided to raise the interest rate in order to prevent further inflation.
Experts explain that central banks resort to raising interest rates for a simple purpose, which is to make people less able to consume, and it is known that the greater the demand for a commodity, the more its price necessarily increases.
For example, a person who wanted to buy a car with a loan will likely hesitate, following raising the interest rate, because the cost will become higher, and when a group of consumers leave a commodity, its price will tend to stabilize, or it will only increase slightly.
But this measure is described as having a limited effect, because prices will inevitably remain at the mercy of external factors, such as the cost of shipping, importing, and warehousing.
One of the side effects of this solution is that it threatens to stagnate the economy because people will spend less, and here experts say that what is required is to create a kind of balance; By guaranteeing speed "reasonable" For the economy, it does not grow rapidly, with which inflation increases in a frenzy, nor does it slow down so much that it falls into a cycle of stagnation.
When demand decreases, the direct result is often an increase in unemployment, which means that decision makers are forced to choose between two things, the better of them; Either a number of jobs will be sacrificed in order to curb the rise in prices, or to ensure economic growth, at any cost, and then even the working people themselves will be unable to keep up with prices in the market.
According to the site "Investo Pedia"Governments that focus on controlling prices in the market do not achieve a positive result in curbing inflation, and soon find themselves forced to search for other, more feasible solutions.
But part of the treatment of inflation does not depend on monetary policies only, but depends on the course of the international arena and what confrontations and conflicts are taking place. On Wednesday, for example, oil prices closed high, due to reports of a decline in US stocks, and Russia’s intention to reduce gas flows to Europe.
hard choice
The big question is whether slowing the economy will be able to curb inflation, whether we call it stagnation or not, says Nobel Prize-winning economist and researcher Paul Krugman. Then he added that there is a glimmer of hope, despite the current situation.
The expert explains that in the United States, for example, prices have already begun to decline, as the price of fuel has fallen by an average of 80 cents compared to what it was at the height of the increase in mid-June.
Although several private companies in the United States continue to raise prices, Krugman says, it is still too early to judge the outcome of things and say that we have defeated inflation.
The economist shows his agreement with the policy that the Federal Reserve has resorted to, even if many express their fears that it will lead to a rise in the unemployment rate in the country.
At the same time, Krugman refers to what some describe as implicit or implicit inflation, that is, inflation that will not be easy or even possible to reduce in the coming period, indicating that some prices may stop rising or that they will decrease to an extent, but they will not return to a level that was Convenient for the pockets of many consumers.
And if the United States, which is the owner of the most powerful economy on earth, is moving on more than one front in order to curb inflation, many other countries, especially the developing ones, do not have the luxury "the choice" It remains dependent on what the future may hold and those who determine its features on the outside.
Perhaps what happened in Sri Lanka, recently, of political turmoil that ended with the country’s president fleeing abroad, amid a severe economic crisis, was… "Warning alarm"According to many, in light of the aggravation of the food and fuel crises, many countries have become unable to guarantee essential services and goods.
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and found governments The countries themselves are faced with limited options, given the external origin of the crisis, as it is mainly caused by the Corona epidemic, an emergency health condition that was not expected, in addition to the ongoing war in Ukraine and the confusion it caused in the world.oil driver and export of grain.
And while the picture looks so dark, take Federal Reserve Board The US Central Bank, which is equivalent to the Central Bank, decided to raise the interest rate in order to prevent further inflation.
Experts explain that central banks resort to raising interest rates for a simple purpose, which is to make people less able to consume, and it is known that the greater the demand for a commodity, the more its price necessarily increases.
For example, a person who wanted to buy a car with a loan will likely hesitate, following raising the interest rate, because the cost will become higher, and when a group of consumers leave a commodity, its price will tend to stabilize, or it will only increase slightly.
But this measure is described as having a limited effect, because prices will inevitably remain at the mercy of external factors, such as the cost of shipping, importing, and warehousing.
One of the side effects of this solution is that it threatens to stagnate the economy because people will spend less, and here experts say that what is required is to create a kind of balance; By ensuring a “reasonable” speed for the economy, it does not grow so rapidly that inflation increases, nor does it slow down so much that it falls into a stagnation cycle.
When demand decreases, the direct result is often an increase in unemployment, which means that decision makers are forced to choose between two things, the better of them; Either a number of jobs will be sacrificed in order to curb the rise in prices, or to ensure economic growth, at any cost, and then even the working people themselves will be unable to keep up with prices in the market.
According to the “Investopedia” website, governments that focus on controlling prices in the market do not achieve a positive result in curbing inflation, and soon find themselves forced to search for other, more feasible solutions.
But part of the treatment of inflation does not depend on monetary policies only, but depends on the course of the international arena and what confrontations and conflicts are taking place. On Wednesday, for example, oil prices closed high, due to reports of a decline in US stocks, and Russia’s intention to reduce gas flows to Europe.
hard choice
The big question is whether slowing the economy will be able to curb inflation, whether we call it stagnation or not, says Nobel Prize-winning economist and researcher Paul Krugman. Then he added that there is a glimmer of hope, despite the current situation.
The expert explains that in the United States, for example, prices have already begun to decline, as the price of fuel has fallen by an average of 80 cents compared to what it was at the height of the increase in mid-June.
Although several private companies in the United States continue to raise prices, Krugman says, it is still too early to judge the outcome of things and say that we have defeated inflation.
The economist shows his agreement with the policy that the Federal Reserve has resorted to, even if many express their fears that it will lead to a rise in the unemployment rate in the country.
At the same time, Krugman refers to what some describe as implicit or implicit inflation, that is, inflation that will not be easy or even possible to reduce in the coming period, indicating that some prices may stop rising or that they will decrease to an extent, but they will not return to a level that was Convenient for the pockets of many consumers.
And if the United States, which has the strongest economy on Earth, is moving on more than one front in order to curb inflation, many other countries, especially developing ones, do not have the luxury of “choice” and remain dependent on what the future may hold and those who determine its features abroad.
Perhaps what happened in Sri Lanka recently, in terms of political turmoil that ended with the country’s president fleeing abroad, amid a severe economic crisis, was a “warning bell”, according to many, in light of the aggravation of food and fuel crises, until many countries became unable to guarantee essential services and goods. .
