Yes. Increase production and inflation will solve itself !
" Producing more goods and services in a shorter time would cut costs per unit and raise supply, putting downward pressure on prices. "
According to the WEF, how did inflation come about ? Ah, because demand exceeds supply and additionally, supply problems have arisen. Because of the lockdowns, restriction of social contacts and self-isolation, the cost of transport has risen sharply ( 35% compared to the pre-pandemic era and even 700% compared to the former low ) and yes, the banks also created money to boost/prop up the economy ( read : added money that was not there ). When the lockdowns ended there was suddenly more demand than supply which caused selling prices to rise. And bla and bla and bla...
"On the demand side, quantitative easing (QE) during the pandemic - in which central banks "created money" to help prop up the economy - has increased the amount of money in the system by over 20%.
When lockdown ended, this helped to ensure that there was pent-up demand for goods and services: retail sales rose by over 20% year on year in May 2021, for instance, and hit another peak of nearly 10% in January 2022. At the same time, demand from firms helped to drive huge price increases in key industrial commodities such as copper and steel. Also, oil prices rose by approximately 67% in 2021 and another 20% in 2022 to date.
Heightened demand has collided with constraints on the global supply chain from social distancing, self-isolation rules and renewed lockdowns in China (even the Ever Given getting stuck). As a result, the cost of shipping goods is around 35% higher than the pre-pandemic high (and over 700% higher than its low). And all of this is before discussing the war in Ukraine.
The response by the Bank of England has been to increase the headline rate of interest from 0.1% to 1%, and to stop QE. Tightening monetary policy affects demand as the interest due on many debt repayments is rising and the cost of borrowing is going up. As a result, the GfK UK consumer confidence index is sitting at -40, a historically low level (when the number is positive, it means consumer confidence is high).
This combination of higher interest rates and higher prices has increased the likelihood of a recession. In part, this is because increasing interest rates discourages businesses from investing. But there's also another problem with discouraging investment: it's part of the long-term solution to our inflation problem.
How can output be increased ? By having governments invest in lowering taxes and developing strategic plans various regions.
" Governments need to incentivise investment to achieve this, by cutting taxes and developing strategic plans for different regions. "
Yo Alexander ! Well heard ? TAX CUTTING, reducing wage costs, reducing VAT, reducing excise duties.... things like that.
The unworldliness of the WEF splashes off the screen. The debt mountain of every country, including B, is so big that there is no question of any reduction in taxes and duties. On the contrary. We, the people, will pay the price.
Raising production with the current killer prices of petrol, diesel, gas, electricity and ... a huge shortage of basic raw materials whose price is also x4 x5 these days : it aint going to happen either.
So much for the " expertise " of the WEF. It is worth as much ( or as little ) as the experts we see reviewed in B. It must be that there is a mercury-filled breeding pond somewhere that they keep fishing these kinds of " experts " out of.
Comments