Tuesday, March 24, 2009

Inflation & Deflation

These few days, something is boggling in my mind. Inflation or deflation ? From what I understand is inflation means inflating the money supply, when money supply is expanded, it decreases the value of money and the result is the price of things seems to be increasing. However, people are shouting its deflation since they are seeing that prices of things are going down. Lets analyze this situation :

  1. You go the market to buy groceries and you found out that the price of vegies and poultry product seems to be higher. So is that inflation ? how will it affect you ? of course it will make feel unhappy since groceries are necessities in life.
  2. You went to a fashion house at this time and you found that the price of designer cloths and wears are decreasing. Is that deflation ? the price of those things might be lower but you still can live happily without those items.
So when people scream " deflation" since designer cloth, SUV's and luxury items are decreasing, how bad can that be. Those items are expensive anyway and people can still live without them. People only buy them when they have the money. However things like groceries, vegies and poultry are necessities, if you live in the middle of a city, you cant afford to grow your own and you will be dependent on the farmers in the countryside. If these things are going to be priced higher, people will start to feel uneasy.

So ... what are you experiencing right now ? inflation or deflation ? is it threatening your lifestyle ? by now i think you already know what to think when the government is shoving information into your skull !

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