Posted by beinvested > 2023-07-22 15:56 | Report Abuse

During the inflation, there will be excessive money going after the limited goods and services in the markets.

In Malaysia, many peoples got lesser and lesser money to buy the daily necessity goods and services because the inflation is "imported inflation" where the costlier raw materials, goods and services are paid to overseas suppliers.

For example, the effect of inflation in the US will be imported to Malaysia because Malaysians are buying the products from the US. The excessive of money in the US was caused by the QE measure/strategy where the Federal Reserve/Central bank intended to spur their economy by buying assets from the markets which started with printing more money. The excessive money in the hand of the consumers will effect the price of the goods and services that are available in their market.

Inflation can damage the economy of the nation because the value of the currency will suffer because the imported raw materials, foods and services will be paid with more local currency. The national debts which are denominated in foreign currencies will burden the nation further when repaying the loans. More local currency are needed to repay the same amount of foreign currency loan. To this end, usually the central bank's reserve in foreign currency will drop and is detrimental to the exchange rate of the local currency.

Inflation also can damage the purchasing power of the consumers when the same salary earned will only getting lesser goods and services because each product is selling at a higher price. The salaried men could not increase their salaries from the employers within the short span of time. But the businessmen will increase their price accordingly which they will be affected lesser to certain extend.

The economists will recommend the hike of interest rate from the banking system where borrowers and consumers will suffer further because more money are needed to service the larger monthly repayment of their loans for housing and motorcars.

At other time, even a country will become bankrupt when expenses can not be covered from the taxes since the citizens are losing their jobs/employment when more factories are closing done because the operations/productions are no longer profitable from the higher fixed cost.

Posted by ahbah > 2023-07-22 17:33 | Report Abuse

No govt got know what causes inflation ? If they got know, then they would had prevented it n there will be no inflation ?

Posted by TrippleZ > 2023-07-23 00:32 | Report Abuse

You either have inflation or deflation. Pick either and you still screwed.

Posted by ahbah > 2023-07-23 16:36 | Report Abuse

If like that, then stagnation is the best ?

Posted by Sslee > 2023-07-23 19:19 | Report Abuse

Stagnation mean no pay rise, interest almost zero and properties you bought 10 years ago remain the same price.

So think carefully what you wish for.