What causes inflation?

I live in a nation that suffered inflation rates around 90% per year in the 80s but in the last decade it decreased to reach something like 4% last year (2006) and the prospects are to try to get 3.5% or less this year. So, we Brazilians, know very well the misfortune of living with a corrosive inflation in a way that a kind of panic subculture was installed and only recently people are more relaxed about it.

Low PRODUCTIVITY,the countries with high productivity have low costs,big market give scale economies,workers qualifieds with a good quality control give better products with low costs like in Japan AND SIMILAR COUNTRIES.......if the country dont have the mentioned and others caracteristic,the inflation rise up..like in latinamerica..if there are high offer to cover the demand the prices dont go up too much.

Equality 7-2521 wrote: I'm guessing you meant to include excessive money printing by governments as a poll choice. None of those answers are really feasible. Counterfiet money could cause it, but it would have to be done on an immensely larger scale than it is now. Excessive money printing.

Equality 7-2521 wrote: It's a routine process to take old money out of circulation and put new money in just as a matter of needing new bills because old notes become worn out. The Fed will print new money for fiscal purposes too, they'll print money to buy government securities from people, thus increasing the money supply which has repricusions on dragging down the interest rate and spurring a stagnate economy, or doing the opposite to slow an economy when it's growing too quickly. Third World coutnries wil often print mass amounts of money to buy goods, usuall weapons, off First World countries that they couldn't afford without printing money. Of course this causes rapid inflation and makes life hell for the citizens.

weapons and all that  need heavy industry or high technology, a lot of many processed products

Edited by markosherrera - February 26 2007 at 18:57

Equality 7-2521 wrote: I'm guessing you meant to include excessive money printing by governments as a poll choice. None of those answers are really feasible. Counterfiet money could cause it, but it would have to be done on an immensely larger scale than it is now. Excessive money printing.

StyLaZyn wrote: You didn't list it but for me inflation is caused by   SEXY WOMEN!!!!!

... sexy inflatable women even.  I prefer inflatable "love ewe long time" sheep.  Blow hard to inflate rams.

The thing is, goods and services get more expensive because workers are getting more and more money. Now once you get a raise you notice that what ever it was you used to buy, is more expensive now. You don't realise though, that you get as much. And while that's how it goes, people who can will take advantage of it. You see, let's say you work at a sawmill. Now there's been a payraise, and you're all happy. But there's some place the mill has to get the money to the raise from. So they raise prices. Now you go buy some wood with all that money, and you realise it's more expensive, and complain, and demand more money. And then you are in the vicious circle. You can't really please both sides.

Then we have countries like Hungary, which has inflation to some rate. The people there are generally considered quite poor, and that is why most tourists find the country very cheap. I visited there myself. They need cheap prices to be able to buy stuff with low wages. And the currency is not stable because they still do export/import goods to other countries, most probably in USD, which makes it dependant on the dollar, and the value of forints is compared to dollars. And for that reason they need to have more forints in the country. See, 250 forints is 1 euro, yet they have coins such as 1 forint, which is basically 0,004e = 0.005284 USD. But they must have the money to pay, and the bigger money to do international trading...

Which of these options is this? I'm not that good in English. Let's just say globalisation and go with "other"...

Passionist wrote: The thing is, goods and services get more expensive because workers are getting more and more money. Now once you get a raise you notice that what ever it was you used to buy, is more expensive now. You don't realise though, that you get as much. And while that's how it goes, people who can will take advantage of it. You see, let's say you work at a sawmill. Now there's been a payraise, and you're all happy. But there's some place the mill has to get the money to the raise from. So they raise prices. Now you go buy some wood with all that money, and you realise it's more expensive, and complain, and demand more money. And then you are in the vicious circle. You can't really please both sides. ...

Prog rock fans! xP