The influence of inflation on residents' income and consumption;
(1) Decline in real income level
(2) The income effect and substitution effect of rising prices lead to the reduction of welfare.
(3) Income distribution effect of inflation: Specifically, the welfare of low-income people (those with less endowment) is damaged, but high-income people (those with more endowment) can benefit; Those who earn income from wages, rents and interest will suffer from inflation; And people whose main income is profit may make a profit.
redistribution effect
In the real economy, output and price level change together, and inflation is often accompanied by the expansion of actual output. Only in a few cases, inflation is accompanied by the contraction of real output. In order to independently investigate the impact of price changes on income distribution, assuming that the real income is fixed, then study how inflation affects the real income of the owners who share the income.
First of all, inflation is not conducive to people living on fixed currency income. For the fixed income class, its income is a fixed amount of money, which lags behind the rise of price level. Their real income has decreased due to inflation, and the purchase of every yuan of income they accept has decreased with the rise of prices. Moreover, because their monetary income has not changed, their living standards will inevitably decrease accordingly.
On the contrary, people who make a living by changing their income will benefit from inflation, and their monetary income will go before the price level and the cost of living rise.
Second, inflation is bad for depositors. With the real increase in prices, the actual price or purchasing power of deposits will decrease, and those who have spare money in their pockets and deposits in the bank will be severely hit. Similarly, pensions, insurance premiums and other valuable property securities, which were originally used as preventive measures and providing for the elderly, will also decline in real value during the inflation period. Inflation is an important means for the bourgeoisie or the ruling class to strengthen the exploitation and plunder of grassroots working people. Inflation first brings profound disasters to workers and farmers. It makes prices keep rising and the purchasing power of money keep declining, which leads to a sharp drop in the real wages of workers and an increasingly poor life. However, farmers and other small producers have to buy the means of subsistence produced by capitalist industries at high prices, and sell their agricultural products and handicrafts at low prices, because in the process of rising prices, the "scissors difference" between industrial and agricultural products is getting bigger and bigger, thus becoming poorer.
Inflation has also seriously affected the lives of ordinary public officials and intellectuals, because their wages cannot be increased according to the degree of price increase. However, inflation has brought great benefits to the monopoly bourgeoisie.
They will not only transfer most of the income plundered by the bourgeois countries from the working people through government orders and price subsidies, but also take advantage of the decline in real wages, or pay off debts with devalued currencies, and take advantage of soaring prices to hoard and reap huge profits. In the case of inflation, it will definitely have an impact on social and economic life. If the social inflation rate is stable and people can fully expect it, then the inflation rate will have little impact on social and economic life. Because under this predictable inflation, various nominal variables (such as nominal wages, nominal interest rates, etc. ) can be adjusted according to the inflation rate, so that real variables (such as real wages, real interest rates, etc. ) remains the same. At this time, the only impact of inflation on social and economic life is that people will reduce the amount of cash they hold. However, inflation will affect social income distribution and economic activities if the inflation rate cannot be predicted completely. Because at this time, people can't accurately adjust various nominal variables according to the inflation rate and the economic behavior that should be taken.
(a) Between the debtor and the creditor, inflation will benefit the debtor and disadvantage the creditor.
Under normal circumstances, the nominal interest rate is determined according to the inflation rate at the time of signing, so when unexpected inflation occurs, the debt contract cannot be changed, thus reducing the real interest rate, benefiting the debtor and damaging the creditor. As a result, loans, especially long-term loans, are adversely affected, making creditors reluctant to issue loans. The reduction of loans will affect investment and eventually reduce investment.
(2) Between employers and workers, inflation will benefit employers but not workers.
This is because, under the unpredictable inflation, the wage growth rate cannot be quickly adjusted according to the inflation rate, so that even if the nominal wage remains unchanged or slightly increases, the real wage will fall. The decline in real wages will increase profits. The increase in profits is conducive to stimulating investment, which is why some economists advocate moderate inflation to stimulate economic development.
(3) Between the government and the public, inflation will benefit the government rather than the public.
Due to unpredictable inflation, nominal wages will always increase (although they may not be able to maintain the original real wage level). With the increase of nominal wages, the number of people who have reached the tax threshold has increased, and many people have entered a higher tax level, which has increased the government's tax revenue. However, the tax paid by the public has increased, while the real income has decreased. The tax that the government gets from this inflation is called "inflation tax". Some economists believe that this is actually the government's plunder of the public. The existence of this inflation tax is not conducive to the increase of savings, but also affects the enthusiasm of private and corporate investment.
Since the reform and opening up, China has experienced three serious inflation, which occurred in 1980, 1988 and 1994 respectively.
Tragedy index
The concept of pain index
The pain index represents an unpleasant economic situation, which is equal to the sum of inflation rate and unemployment rate. Its formula is: pain index = inflation percentage+unemployment percentage, which means that the general public feels the same degree of unhappiness about the same growth of inflation rate and unemployment rate. Neo-Keynesianism According to neo-Keynesianism, there are three main forms of inflation, which is part of Robert Gordon's "triangle model":
Demand-driven inflation-inflation occurs in GDP caused by high demand and low unemployment rate, also known as Phillips curve inflation.
Cost-driven inflation-now called "supply-shock inflation"-occurs when oil prices suddenly rise.
Intrinsic inflation-caused by reasonable expectations, usually related to the price/wage spiral. Workers want to keep raising wages, and their expenses are passed on to the cost and price of products, forming a vicious circle. What has happened in the internal inflation reaction is regarded as residual inflation, also known as "inertial inflation" or even "structural inflation".
These three types of inflation can be combined at any time to explain the current inflation rate. However, most of the time, the first two kinds of inflation (and its actual inflation rate) will affect the size of internal inflation: persistent high (or low) inflation will promote the increase (or decrease) of internal inflation.
Triangular model has two basic elements: moving along Phillips curve, such as low unemployment rate stimulating inflation; And shift its curve, such as the impact of rising or falling inflation on the unemployment rate. This theory mainly focuses on money supply: inflation can be related to economic supply (its potential output) through the amount of money in circulation.
Money supply also plays a major role in moderate inflation, but its importance is controversial. Monetarist economists believe that there is a strong connection; On the contrary, Keynesian economists emphasize the role of aggregate demand, and money supply is only the decisive factor of aggregate demand.
The basic concept of Keynesian explanation method is the relationship between inflation and unemployment rate, which is called Phillips curve model. This model trade-off); Between price stability and unemployment rate; Therefore, in order to reduce the unemployment rate as much as possible, a certain degree of inflation can be allowed.
Phillips curve model perfectly describes the experience of the United States in 1960, but it is not enough to explain the combination of rising inflation and economic stagnation it encountered in 1970. Nowadays, Phillips curve is used to describe the relationship between wage growth and overall inflation, rather than the relationship between unemployment rate and inflation rate. Because supply shock and inflation have become the fixed factors of economic activities, the contemporary overall economy uses the "displacement" Phillips curve (and the balance between price stability and unemployment rate) to describe inflation.
Supply shock means 1970 oil price shock, while intrinsic inflation means price/salary cycle and inflation expectation, which means that inflation is tolerable under normal economic conditions. So the Phillips curve only represents the demand-driven inflation in the triangle model.
Another view of Keynesianism is that potential output (sometimes called gross domestic product)-that is, the GDP level of an economy under the condition of reaching the highest productivity-is a habitual and inherent limitation. This output standard corresponds to Nairu-inherent unemployment rate, natural unemployment rate or full-time unemployment rate. Under this framework, the internal inflation rate is determined by the number of labor in the economy:
When GDP exceeds its potential level (and the unemployment rate is lower than nairu). The theory points out that, other things being equal, as suppliers raise prices, inflation will intensify, while internal inflation will worsen. In addition, the Phillips curve will be stagflation towards high inflation and high unemployment. This "accelerated inflation" appeared in the United States in the 1960 s, when the cost of the Vietnam War (eliminated by a small tax increase) kept the unemployment rate below 4% for several years.
GDP is lower than its potential level (and the unemployment rate is higher than nairu). Other things being equal, as suppliers try to cut prices, the market absorbs excess and underestimates internal inflation, and inflation drops. That is to stop inflation. It will lead the Phillips curve to the expected direction of low inflation and low unemployment. Stopping inflation appeared in the United States in the1980s. At that time, the anti-inflation measures of Federal Reserve Chairman Paul Volcker brought high unemployment rate for several years, including 10% in two years.
When GDP is equal to its potential level (while the unemployment rate is equal to nairu), as long as there is no supply shock, the inflation rate will remain unchanged. In the long run, most neo-Keynesian economists believe that the Phillips curve is vertical. In other words, if the inflation rate is high enough to overwhelm the unemployment rate, then the unemployment rate is the premise, which is equivalent to nairu.
However, taking this theory as the goal of policy formulation is flawed. The number of potential outputs (and nairu) is usually unknown and will change over time. In addition, the occurrence of inflation rate is asymmetric, and the rising speed is faster than the falling speed; To make matters worse, it often changes with policies. For example, during the reign of Prime Minister Thatcher, the unemployed found themselves in structural unemployment, that is, they could not find suitable employment opportunities in the British economy. At that time, the high unemployment rate in Britain may have increased nairu (and reduced its potential). When an economy avoids crossing the threshold of high inflation, the rising structural unemployment rate means that only a small amount of manpower can find employment opportunities in Nairobi.
If nairu and potential output are assumed to be unique and realized soon, then most non-Keynesian inflation theories can be understood as being included in the new Keynesian viewpoint.
When the "supply side" is fixed, inflation depends on total demand. Fixed supply also means that the expenditures of public and private institutions will inevitably conflict with each other. Therefore, the government's deficit expenditure will crowd out the private sector, but it will not affect the employment level. In other words, capital supply and financial policy are the only factors that can affect inflation. Supply-side economic theory assumes that inflation is inevitably caused by oversupply of funds and insufficient demand for funds. For these two factors, the amount of funds is purely a subject matter.
Therefore, the inflation in Europe during the epidemic of the Black Death in the Middle Ages can be considered to be caused by the decrease in capital demand; /kloc-inflation in the 1970s can be attributed to the oversupply of funds in the United States after it broke away from the gold standard set by the Bretton Woods system. The supply school assumes that when the supply and demand of funds increase at the same time, it will not lead to inflation. In economics, inflation means that the overall price level continues to rise. Inflation in a broad sense refers to currency depreciation or purchasing power decline, while currency depreciation refers to the relative reduction of currency value between two economies. The latter is used to describe the value of domestic currency, while the former is used to describe the added value in the international market. The correlation between them is one of the disputes in economics.
The antonym of inflation is deflation. No inflation or low inflation is called a stable price.
In many cases, the word inflation means increasing the money supply, which sometimes leads to higher prices. Some (Austrian school) scholars still use the word inflation to describe this situation, rather than the price increase itself. For this reason, some observers refer to the situation in the United States in the 1960s+0920s as "inflation", although prices did not rise at that time. As described below, unless otherwise specified, the term "inflation" refers to the general price increase.
The antonym of inflation can be "reflation", that is, in the case of deflation, prices rise or the degree of deflation decreases. In other words, although the overall price level has dropped, the range has narrowed. The related word is "slow inflation rate", that is, the rising rate of inflation slows down, but it is not enough to cause deflation.
Some scholars believe that the Chinese word "inflation" literally gives people the association that the value of inflation itself increases, and it is suggested to rename it "price inflation", but it has not been widely used. For a country's economy, there are three most important issues: first, economic growth; Second, inflation; Third, the unemployment rate. Economic growth is the biggest concern of big countries; Inflation is accompanied by many developing countries. This paper mainly discusses the essence of inflation.
Marxist political economy believes that the real cause of inflation is the requirement of capital for average profit rate. In other words: the capital of the same unit requires equal return on investment, that is, there is no difference in capital.
But in reality, capital can't be undifferentiated, which is often affected by the difficulty of capital entering the industry or industry. Therefore, the difficulty of capital entering an industry or industry leads to differentiated profit equalization. The objective difference between such industries or industries can reach a certain equilibrium under the condition of complete market. Once this equilibrium is broken, it will widen the profit ratio between industries or between industries, resulting in inflation. The difficulty of capital entering the industry or industry is influenced by interest rate, division of labor, industry productivity, investment scale, scientific and technological secrecy, human resources, brand, reputation, patents, standards, availability of raw materials and other factors.
Inflation is the inherent attribute of market economy. In real life, the promotion of innovation, the fluctuation of market demand and the bargaining of labor force will make the profit rate of capital different, and then distort the price. The most important reason for this is that the promotion of science and technology makes investors feel that there is a difference between investment and profit rate, so inflation usually occurs when interest rates are lowered and money supply is sufficient. At this time, those sufficient funds will quickly flow from industries with low profit margins to industries with high profit margins; That is, the more liquidity, the more urgent it is to average the profit rate of the industry.
In the period of high interest rate, capital is in short supply, the average profit rate of each industry is not high, and the profit rate varies greatly among industries. However, if the relative profit rate of various industries is completely distorted, inflation may also occur under high interest rates. CPI index is an inaccurate concept, because it can't contain all commodities. In fact, goods not included are often more instructive. For example, innovative products enter the market with high prices and a small proportion of GDP; Other products that will be eliminated have lower prices and lower proportion in GDP, which are often ignored by statistical indicators.
Breaking the balance is often determined by the variability of cost, demand and innovation, which is not determined by enterprises in most cases, such as cost: raw materials and human capital are determined by the outside; The demand is determined by the customer. Demand fluctuates greatly during economic expansion and recession; Innovation often changes productivity, so innovation is determined by the relativity of innovation achievements between industries and is accidental.
From the perspective of enterprises or industries, enterprises have a long-term goal in investment, which in turn determines their asset allocation, such as investment in fixed assets, which determines the pursuit of profit maximization when making profit decisions; Industry is composed of many enterprises, and the country is composed of many industries, so enterprises will not organize production with the average profit rate as the decision, which is another reason.
Investment directly changes the profit rate between industries and enterprises, because investment is an individual (unit) behavior after all, and because investment is influenced by decision makers, environment, resources and psychological expectations, capital differentiation always exists, and sometimes it is still very large. Therefore, it is objective that the profit rate of industries and enterprises is distorted. The requirements of inflation and average profit rate of capital are effective ways to naturally adjust this unfair phenomenon, and they are also applicable to the adjustment in the economic cycle where the profit rate is seriously distorted, such as the period of economic expansion; During the recession, the profit rate tends to average.
However, investment can also conform to the principle of undifferentiated capital. Such as the government's fiscal policy and monetary policy. Fiscal policy can not only realize the equalization of capital profit through fiscal expenditure, but also control the profit rate of various industries through price. Monetary policy is embodied in the regulation of interest rates and exchange rates, such as increasing bank reserves, from which we can see the relationship between inflation and interest rates.
If enterprises maintain a suitable profit margin, appropriately increase labor expenditure (wages) and maintain a suitable consumption expenditure, there is no doubt that the increase in productivity or the increase in producible products brought about by scientific and technological innovation will make the capital economy grow rapidly and individuals have more disposable wealth, but this can only be ideal; As mentioned above, enterprises do not determine the profit rate (accumulation) by social interests, but pursue self-maximization, which determines the nature of capital depressing labor value (wages), so the capital economy grows slowly and the economic cycle is obvious. To solve this contradiction, it is necessary to formulate profit rate policies and supervision suitable for all industries and enterprises from a systematic perspective, with undifferentiated capital as the guide, in line with the relationship between balanced consumption and accumulation, and with the aim of developing the economy through scientific and technological innovation, so as to resolve various defects of the capital economy.
In reality, there are obvious differences in the profit rates of various industries, and this natural difference can automatically reach a certain balanced ratio, that is, the above-mentioned level difference in profit averaging. For example, oil/IT = 4/5; Industry/agriculture =4/3, etc. This ratio can automatically form a reasonable ratio of profit rate of business habits, thus forming a so-called reasonable profit rate in enterprises, industries, customers and society. This equilibrium can be called differential equilibrium of capital level in natural state. That is, the natural average between industries. However, this equilibrium can only be a short-term equilibrium under capitalist economic conditions, and its fundamental reasons are as follows:
(1) The development of the financial system promotes investment to break the original economic structure.
(2) Science and technology bring about the improvement of productivity, so that people have more free time to spend, purchase is no longer controlled by necessity, consumers are more imaginative, and it is easier to change their purchase behavior through psychological activities. Because impulse and irrational purchase exist objectively, which makes the purchase have a strong trend. Make the products provided by some industries expand or contract strongly in a short time.
(3) The irregular innovation of science and technology has an impact on the market structure and affects the economy like a wave.
(4) Due to different profit rates, different cost structures and different market sizes, the speed and quantity of profit accumulation, the speed and mode of asset replenishment, and the speed of market existence and substitution are also different. This will often have a significant impact on the time, scale and speed of new investment.
The average profit of a single industry is different. This "degree" depends on: ① the ideal return on investment of the industry, such as 7% of the industry A. (2) the ratio of the social average profit rate, such as the profit rate of the industry A is 7%, the social average profit rate is 10%, and the ratio of the industry A to the social average profit rate fluctuates between [0.6, 1]. More commonly, demand exceeds supply or supply exceeds demand.
For example, in 2007, the domestic pork price generally rose, ostensibly due to the decrease of pork supply, and its substantive reasons were as follows: First, the price increase made the pork cost rise. Second, the profit of pork is reduced. Many pig farmers don't raise pigs in batches, and if they can't get the scale advantage, they will not raise pigs and do other jobs with higher income. When the price of pork rises, chicken, beef and mutton also rise, because they are all lower than the "social average" profit rate to varying degrees.
Inflation is an important means to adjust the uneven distribution of profit rate, and it is also a natural means to adjust the unreasonable investment distribution. Because of information asymmetry, investment subjectivization, exchange rate, input, output, demand, etc., there is always adaptive adjustment in the economic environment.
The impact of interest rates. Corporate investors raise funds according to relative costs. If monetary policy lowers interest rates to promote investment, then the part of investment used for technological innovation will be obviously insufficient. This is because of the influence of comparable profits, for example, the profit rate of the original industry is generally low. Monetary policy can make decision-makers think that the decline in the profit rate of the whole industry caused by continuous investment in the original industry can make up for the interest cost, but because of the "trap" of economies of scale, decision-makers are too optimistic and further reduce the profit rate of the industry. In this case, innovation is not as good as copying under the original conditions.
As interest rates rise, so does investment. At this time, business decision makers understand that high interest rates must be compensated by higher profit margins. Under the condition of the original industry and equipment, investment can only intensify the competition of the original industry and reduce the overall profit rate. Unless enterprise investment promotes the formation of monopoly, it can accelerate the merger and acquisition of enterprises and promote the formation of economies of scale and monopoly industries. Another situation is the further deepening of innovation, because innovation can bring rich profits and make up for the rise of interest rates, which will lead to the upgrading of industries and the emergence of emerging industries. This change has reduced economic growth and inflation rate; When innovation cannot be promoted, the unemployment rate is high, which is because the merger and acquisition of various industries has fired redundant workers; If innovation is promoted, it will reduce the unemployment rate. Of course, the above two situations are not absolute. Falling interest rates or low interest rates are more beneficial to consumers, thus promoting domestic demand, but the degree of promotion is worth studying, because if there is high inflation or a generally high rate of return on investment, domestic demand will not be promoted, but consumption cost will be higher. Rising interest rates or high interest rates are not conducive to consumption, so investment is suitable for export growth to drive the economy.
Of course, the rise and fall of interest rates alone cannot explain the problem, but it is meaningful to combine relativity with continuity. When the state uses interest rates to regulate the economy, it should consider whether to persist in innovation or tap the economic growth potential of the original industries. Lowering interest rates and keeping them low are similar to regulating the economies of developing countries. Raising interest rates and maintaining high interest rates are beneficial to developed countries.
Since inflation is a reflection of the average profit rate, the lower inflation is, the higher the average profit rate is. The higher the inflation, the lower the average profit rate. This can explain why inflation often occurs in developing countries. (1) Different industries in developing countries have different investment speeds and different profit rates. (2) Lack of control over the price formation mechanism. For example, the United States, developed countries: 1. Set a higher interest rate to reduce the excessive distortion of the return on investment of various industries by blind investment. 2. The market mechanism is developed, and the government's influence on prices spreads rapidly. Enterprises can flexibly change their profit targets according to their own costs.
Inflation cannot be eliminated, because no matter what kind of investment increases, it will destroy the average profit rate. The new investment cannot be evenly distributed in all industries. If you invest in new industries, new industries will also break the original capital equalization by crowding out the market of the original industries. In addition, due to the existence of ideology, preference always exists, and the natural flow of capital is impossible. Information asymmetry will hinder the flow of capital.
On the surface, economic growth drives inflation; However, there is also the opposite situation. For example, the government has formulated a high interest rate policy, which makes investment have to consider more related costs, while consumption is not very active, and the investment interest rates of various industries are relatively similar. Once the interest rate is lowered, investors will have a lot of choices when making decisions, which may quickly disrupt the market, distort the profit rate of various industries, and increase economic growth and money. Under normal circumstances, high inflation at low interest rates is conducive to attracting more people to work, because investment is often concentrated in the original industry or product; However, the economic growth with high interest rate is difficult to judge the employment growth of personnel, because if the purpose of innovation and technology is to reduce the number of people, the employment of personnel will not increase (which is manifested in the primary and secondary industries), while the purpose of innovation and technology is not to reduce the number of people (such as the tertiary industry) will increase the employment rate.
At the top of the high interest rate, most investment is restrained, the profit rate of some traditional products such as daily necessities is stable, and the profit rate of non-essential and emerging products such as durable goods is declining. There are two states. If we want to keep the market, we must reduce the price. If we don't lower the price, the market supply will decrease. Among them, the proportion of shared costs such as fixed costs to unit products will increase, its profit margin will also decrease, and the profit difference will narrow.
At the bottom of low interest rates, there is sufficient capital and liquidity. The price increase of daily necessities and traditional products is less than that of non-necessities such as durable goods and new products, thus widening the profit margin difference of the industry. At this point, the former product may catch up with the latter product to balance the spread until it narrows, which is also the starting point of overall inflation.
The appreciation of exchange rate has two effects: first, export-oriented enterprises can receive more foreign exchange, the profit rate decreases, and enterprises accumulate more funds. Second, the profits of other non-export industries or vulnerable industries have also decreased, exports have exceeded imports, the exchange rate has risen, the domestic money supply has increased, inflation has occurred, the exchange rate has continued to rise, and foreign investment in the country has increased. Due to the change of exchange rate, the profit ratio of domestic industries has obviously deviated, and the export industry has been sought after because it can create more profits, attracting domestic and foreign investment funds, and talents and other resources have also flowed to export enterprises.
Even if the cost of weak industries does not increase, the output is obviously insufficient due to the reduction of investment; In the case of sufficient consumption, prices rise, and because of government control and strict import approval, inflation rises rapidly, but the unemployment rate is very low; At this time, the government relaxed import restrictions, and the exchange rate and inflation decreased at the same time. This is also suitable for the economic analysis that imports are greater than exports.