Wednesday, June 09, 2004

Inflation is our friend

Inflation has gotten a lot of bad press lately.

It's as if we would all be better off if it would just go away. Then we wouldn't have to worry about rising interest rates, right?

Wrong.

Looking at the inflation rate of a country is a good way to guage it's economic health.

Assuming a country isn't engaged in war or some other political turmoil, inflation is one of the best ways to know when the economy is strong and when it's weak.

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Every economy is capable of producing more each year. At the same time, consumers demand more and more. They always want a newer TV, car or house. This is what causes prices to rise.

Looking at a country like Japan, where prices are falling, you might think people there are enjoying lower prices each year. Unfortunately, they're not.

Much like a sick patient, where the temperature is dropping, Japan's economy is also sick.

The best way to cure the disease and is to get people spending and spending more each year. To get people wanting to spend their income on new and improved products, instead of sticking with the old TV and saving their money for a rainy day.

1 comment:

Homeless Comic said...

Spend too much, lose your job and you'll be living with me.