Inflation is usually called a steady increase.prices for goods and services. This means that the same amount allows consumers to buy less and less things over time. What modern person did not come across this situation? In this case, economists say that the purchasing power of money falls. Even more interesting is hidden inflation. This and much will be the subject of consideration in this article.
The market economy is characterized by gradualprice increase and depreciation of money. To a certain extent, this contributes to the development of the national economy. However, everything is good in moderation. If money too quickly loses its real value, then this becomes a problem with which the state has to fight. And there are different methods. Usually they are divided into monetarist and Keynesian. In a market economy, inflation manifests itself openly - in the form of price increases. With the administrative-command method of housekeeping, everything is not so obvious. In this case, prices do not rise, but there is a shortage of certain goods. This is hidden inflation. Sometimes it is also called depressed. In a market economy, prices are set on the basis of the law of supply and demand, but in the command economy everything is decided by the state. Thus, it can inhibit the rising cost of goods. This leads to the fact that demand begins to dominate supply. So there is a shortage, which over time becomes more and more, if the situation in production does not change. It is necessary to distinguish inflation from a sharp jump in prices. The first phenomenon is always a long process, and the characteristic is not necessary for all industries at once. The opposite process is deflation. It is associated with lower prices. In a market economy, this phenomenon is rare. Often it is seasonal. For example, in the summer prices for vegetables and fruits, milk and eggs often fall, in the fall - for cereals. It is extremely rare to face a long period of deflation in the economies of modern countries. Separately, hidden inflation should be considered. This is a much more interesting phenomenon, for which the rise in prices is not typical at all.
In world history several times it was possibleobserve a sharp depreciation of money. This was due to the decline in the value of the metals from which they were made. For example, in the first half of the 16th century, silver production increased more than 60 times as a result of the discovery of America by European mariners and the subsequent development of its deposits. During that period, prices rose by an average of 3.5 times. But this is not an isolated case. At the beginning of the 19th century, the development of gold mines in California began, and then in Australia. This led to the fact that prices increased by 25-30%. And it was observed all over the world. It should be noted that the modern monetary system, established in 1976-1978, is not based on the gold standard. Modern money is fiat. They do not have their own value. Therefore, inflation is not associated with an increase in the supply of gold and silver. A minor level of inflation is considered the norm by most modern economists. Usually it is a little more at the end of the year, which is associated with an increase in the consumption of all economic entities. Hidden inflation is a phenomenon that occurs in countries in transition. For developed capitalist states, it is not typical.
As we have already found out, the rise in prices is characteristic of the market way of doing business. However, what is the reason? Among the causes of inflation is usually called:
In terms of manifestation, it is customary to single outopen and hidden inflation. And if the first type is characterized by a rise in prices, then the second is not. Hidden inflation is manifested through a shortage of goods. Prices remain quite stable in this case. However, the purchasing power of money still falls. Typically, open inflation is typical for a market economy, hidden for the command economy. However, most modern states use a mixed style of business management. Therefore, hidden inflation can occur in some countries. However, a commodity shortage usually lasts a short period of time. This is due to the fact that today all countries are connected by a solid network of commodity relations.
Open inflation can occur at different rates. Depending on the growth rate of prices, there are several types of this phenomenon. Among them:
The recent economic crisis has shown howfragile are modern financial institutions. Rising prices further increases the risks associated with lending and investing. In contracts for the construction of real estate, there are more and more often conditions regarding the adjustment of rates and sums in accordance with the rate of inflation. However, the rise in prices may be a positive phenomenon. This is due to the fact that it allows you to attract more money and expand production. Then prices will decrease, which is associated with an increase in supply.
For command economycharacterized by state intervention in all areas. Government policies can cause an increase in the money supply over a long period of time or production costs. In the first case, we can observe an increase in demand, in the second - a decrease in supply. Both options suggest that prices should rise. However, it is in a market economy. The administrative-command style of management allows the state to establish full control over prices. Their immutability will lead to a mismatch between the volume of supply and demand. Hidden (suppressed) inflation is manifested just through the emergence of a product shortage. The latter may be characteristic of a market economy. During wars or large-scale crises, governments of capitalist countries also often intervene in the natural course of events. This is manifested through the "freezing" of prices for strategically necessary goods. And then the capitalist countries may also face manifestations of hidden inflation.
Hidden inflation manifests itself as a gap betweenthose prices that are set by the state, and their real values. As a result, the population may begin to accumulate funds. At first glance, it seems that money does not depreciate. However, in reality it is not. Manufacturers are beginning to suffer more and more losses. Over time, it becomes unprofitable for them to release anything at all. Counters are empty, because the real price of goods is much more than that which the state has established. However, it is not enough to say that hidden inflation manifests itself in a deficit. Among its features are the emergence of new varieties of products that use less quality ingredients, and a decrease in servings of packaged products. In the conditions of fixed prices, manufacturers are trying their best to reduce the cost of production.
In a market economy, revenue growthpopulation or production costs increases the cost of services and goods. However, state intervention can inhibit this process. Hidden inflation often has much more serious consequences in the long run than open inflation. As a result, the quality of products decreases, the organization of labor and the development of the shadow economy deteriorate. After the government stops restraining the rise in prices, everything becomes sharply several times more expensive, which often leads to a new round of crisis.
The Soviet Union, especially during the time of Stalin, -it is truly a unique state. During this period, the government pursued a policy of lowering prices while simultaneously increasing wages. This led to depressed (hidden) inflation. There was a shortage of goods in the country. The residents had money, but there was nothing to spend it on. The savings rate was much higher than in Western capitalist countries. The collapse of the USSR provoked a sharp depreciation of money, which was associated with a sharp drop in the level of production and general instability in the economy. Post-Soviet republics swept a wave of inflation.
Уровень инфляции может быть сбалансированным и not. In the first case, all prices rise proportionally. In the second, they grow unevenly for various goods and services. Often this situation is typical for a modern market economy. There are, for example, "propulsion" industries that act as a kind of engine for the development of the economy. Prices for their products often grow faster than others. In addition, there are projected and unexpected inflation. The first is a planned event for which you can prepare. Often it is laid in the state budget. Economic entities can focus on this level. That it is the key to the development of the economy, which is said by most economists. As for unpredictable inflation, it is a complete surprise. And this can be a huge problem for the development of the economy. The rise in prices for goods can significantly exceed the one that was expected. To solve this problem, the government should take anti-inflation measures. Their effectiveness often determines how effectively prices will be stopped. However, it must be understood that this is not always possible. Sometimes the rise of inflation is associated with a bursting financial bubble, that is, the government's short-sightedness in the past. In this case, a whole range of measures is needed, otherwise the problem may lead to a protracted economic crisis.
