Doctor of Economic Sciences I. OSADCHAYA.

Inflation is a steady rise in prices, which ultimately depreciates the value of money, income and savings of the population. even the weakest inflation is fraught with enormous dangers for the development of a modern monetary economy. It is no coincidence that in the economic policies of all countries (including the most developed) anti-inflationary measures - primarily monetary measures aimed at limiting the growth of money supply - are of paramount importance. The famous English economist J.M. Keynes wrote back in the 20s of the last century (mainly under the influence of colossal post-war inflation in Germany, defeated in the First World War): “there is no more cunning, and at the same time more sure way to overthrow the existing social order than the depreciation of money.”

Science and life // Illustrations

After the currency reform in Germany (1923), junk dealers bought old banknotes by weight.

When inflation sweeps goods off store shelves, a line can line up for men's hats. Drawing by Danish cartoonist H. Bidstrup. 1950s.

Dynamics of the consumer price index in 1992 - 2001. For almost two years (from mid-1992 to mid-1994), the monthly growth rate of consumer prices exceeded 15%.

Annual growth rates of the consumer price index (CPI) in 2000-2008.

On the conveyor belt is Druzhba processed cheese, one of the great brands of the Soviet era, when prices for all goods were fixed.

Share of social expenditures in GDP as a percentage (2006). Data for developed countries do not include spending on education, which reaches 5-6% of GDP. In Russia, these expenses amount to 1.3% of GDP.

CAUSES OF INFLATION AND HOW TO FIGHT IT

Inflation is a monetary phenomenon associated with an excessive release of money into circulation compared to the supply of goods. However, this increase in money occurs for various reasons. And the first of them is the growth of household incomes, which is not supported by a corresponding increase in the production of goods. This is how excess demand appears, pushing prices up - a phenomenon that is especially clearly manifested in a war economy. In this case, it is customary to talk about “demand inflation”.

Inflation is also caused by an increase in costs, which entails a rapid increase in prices for some goods or services of natural monopolies, for example, utilities. Then they talk about “cost-push inflation.” True, it is almost impossible to separate these two processes in real life, and debates about what came first - “the chicken or the egg,” demand or costs,

Often they don't make sense. Both processes are interconnected. An increase in costs, and therefore prices, requires compensation for the dwindling income of the population (salaries, pensions, benefits, etc.). The new injection of money into the economy, in turn, increases demand, putting pressure on prices. And everything repeats itself in a new round of the vicious inflationary spiral.

Inflation can take many forms. In a regulated economy, primarily a planned, command economy (such as existed in the USSR), as well as in wartime conditions, when prices are fixed, it can be of a hidden nature - this is the so-called suppressed inflation. Its companions include a shortage of many products, a surge in shadow trade, a sharp increase in prices in the markets, etc. However, the abolition of such regulation (after a war or in countries that have transitioned from an administratively regulated to a market economy) often gives rise to “galloping inflation” with wildly rising prices. It arises due to the so-called huge “money overhang,” in other words, the discrepancy between the cash supply of money and the insufficient quantity of goods.

Inflation is sometimes expressed in a relatively slow, almost imperceptible rise in prices - it is called creeping. However, the long-term consequences of such inflation have a very harmful impact on the state of the monetary system and the well-being of the population.

During periods when demand begins to exceed supply, inflation tends to increase. However, periods are known (for example, the 70s of the twentieth century in developed countries) when inflation and a decline in economic growth rates combined into a new phenomenon called “stagflation” (stagnation plus inflation).

The so-called waiting moments play a significant role in the development of the inflation process. The expected rise in prices is pushing the population to buy goods. This creates an artificial shortage of some of them, and consequently, prices increase, which forces them to demand an increase in wages in advance (if there is a system of collective agreements). This kind of inflationary expectation is especially difficult to bring down.

Representatives of the main directions of modern economic theory differ in their assessment of the role of one or another cause generating inflation. Hence the differences in the proposed recipes for anti-inflationary policy.

Among theorists, primarily Western ones, the most common explanation for inflation is an excessive increase in the money supply. Proponents of this point of view - monetarists - proceed from the quantity theory of money. Here is its essence: any increase in the money supply that exceeds the growth rate of the gross national product inevitably gives rise to an increase in prices. What are the reasons for such inflation? In the expansionary monetary policy of the central bank and the growth of government spending. Hence the methods of anti-inflationary “treatment” proposed by monetarists: reduction of budget expenditures and strict monetary restrictions. The main task of the central bank, in their opinion, is to maintain stable prices and stability of the monetary system, allowing the growth of money supply only in accordance with GDP growth.

This, according to monetarists, is the main “rule” that the government must follow, regardless of the nature of the economic situation and the level of unemployment, which require an increase in government spending to revive the economy and stimulate production growth.

This group of theorists is joined by supporters of the so-called institutional theories, who believe that the main cause of inflation is excessive government spending - it is generated by the interests of certain groups of the population, political parties and the ruling bureaucracy. The main counteraction to inflation, in their opinion, is freedom of competition, free market relations and, above all, limiting the growth of state intervention in the economy, while the state bureaucracy is vitally interested in the opposite. Therefore, such a bureaucracy cannot be expected to truly control or limit this growth. Consequently, such restrictions must be introduced in the form of constitutionally enshrined rules that would protect the market system from the distorted influence of excessive redistributive activities of the state.

There is also the Keynesian theory of inflation, which is also associated with the pressure of monetary demand. However, according to this theory, not every increase in money demand causes inflation. On the contrary, an increase in the amount of money in circulation when there is underemployment, high unemployment and significant underutilization of production capacity in a country can, according to Keynes, stimulate production growth without affecting prices. True inflation appears when there is full employment of human and production resources. Then a further increase in money demand leads not to an increase in production, but in prices, that is, to inflation.

Other economists focus on the role of costs. They see the key element driving the inflationary spiral (costs - prices - costs) not so much in wages, but in the policy of trade unions, which, when concluding agreements with entrepreneurs, seek special clauses on a possible increase in wages if inflation rates increase - that is, about its indexing. But the fact is that large corporations easily translate rising wage costs into prices. Thus, the mechanism of continuous price increases is built into the modern economy of corporations and powerful trade unions.

Theoretical discussions about inflation and ways to combat it appeared in a developed market economy. To some extent, they can explain the nature of inflationary processes in our country. But, I repeat, only partially. In our economic system, in its sectoral structure, there are so many features, or rather, disproportions, without taking into account which it is impossible to explain such a multifaceted process as inflation.

It is not the task of the author of this article to show how inflationary processes developed there, “over the hill.” I will only say that the economies of Western countries, especially the United States, experienced the greatest “suffering” from inflation in the 80s of the last century, when fuel prices sharply increased during the oil crisis. In the United States at that time, much was written about double-digit inflation, reaching 14% per year. However, by the end of the 1980s, thanks to measures taken both in relation to costs and in relation to money supply, inflation dropped to 5-6%. In recent decades, both in the United States and in the countries of the European Union, the annual rate of price growth has remained at the level of 2-2.5%. Today, inflation manifests itself primarily in world markets - in the rapid rise in prices for basic resources (oil, gas and metals) and for food products.

FEATURES OF INFLATION IN RUSSIA

Many believe that in Soviet times, right up to the beginning of reforms in the 90s of the last century, prices rose (they were fixed for all goods), and therefore inflation did not exist in Russia at all. In fact, the inflationary process developed - quietly and secretly. Inflation was subdued. According to some data, the annual rate of price growth in the 80s was 1.5%. Soon food products almost disappeared from store shelves. People of the older generation remember the “sausage excursions” to Moscow. In many cities, a kind of card system has appeared - coupons, food orders. Money meant little; there was almost nothing to buy with it.

The transition to economic reforms in the 90s - and they began with the liberalization of prices in an environment of general shortages and the collapse of production - made inflation open and truly “robbery”. The “money overhang” (that is, the gap between the mass of money thrown into circulation and the volume of commodity output), which had emerged under these conditions, collapsed. Inflation has reached catastrophic proportions. In 1992 alone, prices increased 26 times, and in the next year - another 10. Consumer prices in the first half of the 90s grew monthly by 15-18%.

The measures taken (primarily a sharp tightening of monetary policy) led to the fact that by 2000, inflation began to weaken. The annual increase in consumer prices in 2002 was 15.1%, in 2003 - 12%, in 2004 - 11.7%, in 2005 - 10.9%, in 2006 - 8.2% . For 2007, it was planned to bring inflation to 6-7%, and in 2008 - to 4-5.5%. And suddenly the autumn of 2007 gave an unexpected outbreak of price increases, overturning all forecasts. The government was forced to take emergency administrative measures to freeze prices on socially important products - six types of food.

In just one month, October 2007, consumer prices rose by 1.6%, and food prices by an average of 3.3% (this was more than three times the September price increase). Some food products managed to rise in price even before the price freeze: prices for sunflower oil increased from July to October by 60%, for butter, milk and dairy products - by 50%, for eggs - by 40%. The inflation rate for 2007 as a whole was, according to official data, 12% (one should not forget that the above figures are average figures). According to calculations by the Center for Macroeconomic Forecasting (CMAP), during 2007, goods in the “basket for the poor” increased in price by 15% (in 2006 - by 9%).

What caused such a sharp revival of the inflation trend? What is its nature - short-term or long-term? “Our” and “not our” experts argue a lot about this. Where to look for the root cause? Is it an excess of demand resulting from the excessive release of money into circulation, or an increase in costs? In my opinion, such a contrast is fundamentally false. For, as already noted, both reasons are interdependent, and no matter where we start, we will certainly end up with a vicious inflationary spiral.

Let's start with the main thing - with an increase in money in circulation. Such an increase occurred and is occurring for many reasons, including thanks to the serious social policy of the state aimed at increasing the incomes of the population, whose demand is beginning to grow. Many Russian economists see this as the main reason for the development of inflation in the country. Others take a more cautious position, not seeing a direct connection here. The second position seems more balanced. I will refer to one of these studies.

Indeed, its author notes, in Russia throughout the 90s of the twentieth century and in the new century, the growth rate of the money supply systematically exceeded the indicators planned by the central bank. The range of these excesses is from 20 to 50%. In total, during the period from 1999 to 2006, the money supply increased 13.4 times. “Here comes inflation,” a supporter of the first position will say. But it's not that simple. Firstly, along with the increase in the money supply, there was and is an increase in the demand for money itself, and savings increase. Evidence of this is the growth of household cash deposits in savings institutions, especially in Sberbank (this reduces the relationship between the increase in money supply and the consumer price growth index). Secondly, the speed of circulation of money slows down, and a large amount of money is required to service the same commodity turnover. And finally, the third factor that must be taken into account: the volume of money in circulation is important not in itself, but in comparison with the value of GDP - this ratio is called the monetization coefficient.

It must be said that with the beginning of the reforms, when inflation exceeded all imaginable levels and the government began to pursue a tough monetary policy, the monetization coefficient was reduced to the minimum imaginable size. Even at the beginning of 1999 it was only 16%. Then they talked and wrote a lot about the underfinancing of the economy, which became one of the reasons for the acute shortage of money among enterprises. Remember non-payment of salaries and pensions, the spread of barter exchange?

Figures for comparison: the monetization coefficient in developed countries ranges from 60-120%, and in countries with transition economies it is 25-30%. To date, this figure has reached 26%. As we can see, nothing catastrophic has happened in the growth of money supply so far.

Catastrophic consequences could have occurred if the central bank and the government had not restrained the growth of the money supply entering the country from the sale of continually rising oil prices on foreign markets. Among the deterrent measures, first of all, we note the role of the Stabilization Fund. Its value today is almost 4 trillion rubles. For many years now there have been discussions on the topic: how long should this “bag” of money be increased and is it time to spend it in one way or another? Opponents of this type of spending have two main arguments. First. The main purpose of the fund is to create a “safety cushion” in case of a sharp drop in oil prices and a crisis situation in the country. The second argument is no less important: the danger of rampant inflation due to a sharp increase in the money supply. (The same role is played by the budget surplus, that is, the excess of government revenues over expenses - more than 7% of GDP.)

Recently, the arguments of those who believe that it is time to use part of the accumulated funds to develop important sectors of the economy, especially its infrastructure, have prevailed. It was decided to divide the Stabilization Fund into the Reserve Fund (in the amount of 10% of GDP) and the National Welfare Fund in February 2008. According to data announced by Finance Minister A. Kudrin, in 2007 Vnesheconombank has already received 180 billion rubles for development purposes, the Russian Nanotechnology Corporation - 130 billion rubles, and the Housing and Communal Services Reform Assistance Fund - 240 billion rubles.

But let’s return to the prices that seemingly so unexpectedly soared last fall. Investigating the reasons for rising prices in the country, many economists point to the high costs generated by the unreasonable degree of monopolization of industries supplying food to the consumer. In other words, we are reaping the results of extremely weak development of small and medium-sized production and complete inaction of cooperation. Here's an example: in one package of milk, only 5% is its cost; everything else is packaging, taxes and especially high trade markups that form the profitability of retail chains. In our country it reaches 25-30% (while in Europe a rule has been introduced according to which retail profitability should not exceed 8-12%).

Finally, we must point out the very high growth rates of prices for utilities and housing, transport, communications and gasoline - they significantly exceeded the average growth rate of consumer prices. For example, the cost of electricity in Russia as a whole increased by 15%, and for utilities - by 18-20%. Gas prices are also rising: in 2008, wholesale gas prices for households and industrial consumers will increase by 25%.

INFLATION AND FOOD PROBLEM IN RUSSIA

The so-called unbalanced food problem plays an important role in the development of the inflation mechanism in our country. We are talking, first of all, about the shortage of food products. And it is the result of the previous weakness of our almost bankrupt agriculture, which was bankrupt not only as a result of the reforms of the 90s. They only revealed the complete lack of competitiveness of its organizational forms - collective farms and state farms, which arose in the early 30s of the last century. It is no coincidence that during the transition crisis the decline in production in agriculture turned out to be much stronger than in industry. A huge gap has formed between supply and demand. Moreover, for some types of food it continues to increase. (For more information about this, see “Science and Life” No., article by B. Rudenko “What will we be full of?”.)

This gap is filled by imports, which, unfortunately, tend to increase. Here are some figures: in recent years, the share of imports in the consumption of butter has reached 52.3%, fatty cheeses, including feta cheese - 42.1%, sugar - 67%, fish - 30%, vegetables, fruits, berries - 32% , meat and sausage products - 40%, raw meat - 80%. In general, 35% of the products included in the Russian diet are imported from abroad.

The meaning of imports is controversial. On the one hand, it replaces the missing food and thereby solves important socio-economic problems, but, on the other hand, it displaces domestic producers from the market. This often happens because imported products are cheaper than domestic ones. At the same time, we find ourselves captive to the price movements that occur in world markets. For example, in recent years, food prices have begun to rise everywhere (according to some data, they have increased by 2.5 times). There was even a special term - “agflation”, that is, “agricultural inflation”.

What underlies the rise in prices for agricultural products? First: a decrease in stocks of grains and oilseeds in many countries of the world, especially in developing countries, due to worsening weather conditions - droughts, floods, etc. Second: a decrease in public reserves in major food exporting countries, combined with a gradual abandonment of policies export subsidies. (We are talking, first of all, about the EU countries.) Third: an increase in food imports from the rapidly growing countries of Southeast Asia (China, India, etc.). And finally, fourth: the accelerated formation of the biofuel industry, which is changing the relationship between the fuel and agricultural sectors in the world economy and affecting the prices of agricultural products.

Agflation had the greatest impact on grain crops, vegetable oil and dairy products. And the increase in import prices for these products, in turn, influenced the acceleration of our domestic inflation in the fall of 2007 (it is often called imported inflation). But it also happens: our government’s measures - quotas and restrictive duties aimed at curbing the import of certain types of products (primarily livestock, in order to create more favorable conditions for the development of domestic production) - actually spur price increases. The rise in price of meat is always the result of such a policy. “Quotas on meat and poultry are our man-made inflation,” admitted Finance Minister A. Kudrin, explaining the surge in consumer price growth in 2003-2004. The Rossel-Khoznadzor ban on importing meat from Brazil and measures taken by Argentina to limit its exports led to meat prices jumping by 40% in 2006. There are many such facts that can be cited.

There is every reason to believe that the current inflation was not caused by the increase in money in circulation itself. It rather compensated for the rise in prices that resulted from increased costs. In other words, the same inflationary spiral is at work in which cost-push inflation and demand-side inflation interact, a spiral that is mediated by growing money circulation and which is especially difficult to stop.

WHAT TO DO?

Fighting inflation, as the experience of developed countries and our own shows, is extremely difficult. It would seem that what would be simpler: freeze prices or introduce some form of regulation of certain types of prices. Unfortunately, this method can only help for a short time. Freezing prices will soon result in increased shortages of certain goods and will further worsen inflation. We have already “been through this”, and we should not step on the same rake. Moreover, as many researchers note, a certain increase in prices for agricultural products is inevitable, since currently there is a serious disparity in prices for industrial and agricultural products, which fundamentally inhibits investment in agriculture.

The option of cutting social spending, the growth of which, according to some experts, is to blame for modern inflation, has been ruled out. These costs are actually not as large as our anti-inflationists make them out to be. They only partially compensate for the miserable life of low-income groups in Russia. If you look at the share of social expenditures in GDP in Russia, then in comparison with developed countries they are very moderate (see table)

As we see, it is not social expenses that are to blame for the rise in prices in Russia. The reason for the current acceleration in price growth should still be sought in the area of ​​real factors that have already been mentioned. In support of this conclusion, I will cite the opinion of one very authoritative specialist on this issue. Speaking at the XVII Congress of the Association of Russian Banks in early 2007, the recent head of Sberbank of Russia A. Kazmin said: “Why are we fighting inflation only by limiting the money supply and thinking little about stimulating the supply of goods? With this approach, inflation will rise, despite measures to limit money demand... We may find ourselves in a situation where, thanks to the policy of limiting money demand, the production of goods not only for export, but also for the domestic market will become unprofitable. Accordingly, we will depend even more on imports, and competition in the domestic market will decrease.”

Agriculture deserves special attention from the state. The state in all developed countries, in one form or another, takes care of the agricultural producer. In Russia he found himself abandoned to the mercy of fate. To date, when most of the former farms - collective and state farms - have gone bankrupt, and newly created farmers have barely survived in tough market conditions, we have developed a rather unique economic structure. The role of the private farming sector has increased sharply. It produces approximately 40% of domestic agricultural products. But this, in essence, is a subsistence economy that helps the population, especially in the provinces, to survive. Another 8% of production is produced by our heroic farmers. The remaining 50% of production is provided in equal shares by the surviving collective and state farms (25%) and the same amount by new agro-industrial holdings created with funds from large industrial enterprises.

And here the program adopted by the government for the development of the agro-industrial complex (AIC) seems especially important. The program includes three areas: accelerated development of livestock farming; stimulating the development of small businesses; providing affordable housing for young professionals (and their families) in rural areas. The project is aimed at increasing financial support for agriculture, and not through direct government investment (when there is a great threat of direct theft of money or its misuse or ineffective use), but based on purely market methods - expanding lending and subsidizing interest rates. Preference is given to the development of the strongest and most efficient farms that are able to quickly raise their technical level and increase the amount of marketable products.

It is expected that the program will stimulate the influx of private capital into agriculture, thanks to which a fairly solid sector of agro-industrial holdings has already been created, specializing mainly in the production of meat and dairy products.

There are many critical reviews of this program. And yet, the program is a very important contribution from the state to solving the food problem in the country, which, among other things, has an undoubted anti-inflationary orientation.

To believe that inflation can be eliminated once and for all by putting some kind of “reasonable” government in power is a naive utopia. It can be reduced to a minimum, for example to 2-3%, which the governments of most developed countries have managed to do. But this requires hard work to limit all those objective and subjective factors that put pressure on prices, pushing them up.

Something else is also important. Even in conditions of declining rates of price growth, the need remains for periodic indexation of income, that is, increasing their nominal value in accordance with rising prices, especially in those areas of the economy where incomes are fixed and do not increase with production growth. We are talking, first of all, about state employees. The government has already recognized the reality of this kind of action, emphasizing in a number of official speeches that the next (in February 2008) increase in pensions and incomes of public sector employees is compensation for rising prices and nothing more.

The work was carried out with the financial support of the Russian State Science Foundation (Russian State Science Foundation) within the framework of project No. 06-02-02043a “Russian transition economy in the mirror of world economic thought.”

We invite you to familiarize yourself with such issues as the essence, types and causes of inflation. Agree, they are very relevant today. Levels of inflation, types of inflation, measures to combat it - all this has been actively discussed in recent years in connection with the current situation in the global and Russian economy.

What is inflation? This is a crisis state of a particular monetary system. This term itself arose in relation to money circulation in the mid-19th century. It was introduced in response to the massive issuance of paper dollars during the United States Civil War (1861 to 1865). Inflation, the causes, types and essence of which we are interested in, has long been understood as an increase in commodity prices and the depreciation of money. It was considered a monetary phenomenon. However, modern inflation is also associated with the general unfavorable state of development of the economy of a particular country, and not just with a decrease in the purchasing power of its monetary unit.

What does inflation lead to?

In an economy that is functioning normally, there should not be a significant increase in prices, that is, depreciation of money, meaning inflation. Inflation leads to a decrease in the purchasing power of money, as well as an increase in prices for services and goods. At the same time, prices for individual types are growing unequally.

"The Age of Inflation"

According to economists, civilized countries have entered the so-called “age of inflation” over the past 30 years. Today, inflation of 2-3% is considered a normal phenomenon of the global market economy.

Some causes of inflation with examples

Almost all countries have many reasons leading to inflation. However, in each case, the combination of factors in this process depends on specific economic conditions. For example, in Western Europe immediately after the end of World War II, inflation was associated with acute shortages of many goods. Subsequently, government spending, the wage-price ratio, the transfer of inflation from other countries, as well as some other factors began to play a major role in promoting this process. If we consider the former USSR, then here, along with some general patterns, one of the main causes of inflation in recent years can be considered a unique disproportionality that arose in the economy as a result of the functioning of the command-administrative system. Long development in wartime regime (according to some data, the accumulation rate reached half of the national income, while in Western countries it was only 15-20%), high degree of monopolization of the monetary system, distribution and production, low share of wages in the national income fees, as well as some other features were inherent in the Soviet economy.

Hyperinflation, galloping and moderate inflation

There are different types of inflation. The most common is the following three types:

• hyperinflation, in which prices rise by more than 200% per year;
• galloping inflation (per year from 20 to 200%);
• moderate, which is accompanied by their growth of no more than 10% per year.

Galloping, and even more so hyperinflation, is considered extremely undesirable. These types of inflation lead to severe economic and social consequences.

Suppressed inflation

There are other divisions. For example, there are such types of inflation as open and suppressed. Suppression is possible only under strict control by the state. It is characterized by demand-side inflation, which arises as a consequence of excess aggregate demand (aggregate expenditures) in conditions under which employment is close to full. Suppressed inflation thus manifests itself in worsening shortages of goods.

In our country, such a process was observed in the 80s. In addition to the deficit, during this period the inflationary process was also characterized by the fact that, at constant prices, the quality of products deteriorated, and unjustified shifts in the assortment were observed (a reduction in the production of cheap goods and an increase in the production of expensive ones). Instead of one imbalance at the beginning of the 1990s (few goods - a lot of money), another one arose. The shortage of money led to a drop in demand, and then to a decrease in production. The problem of non-payments has worsened. The state delayed the payment of wages to many people. It could also not fulfill its obligations for the supply of agricultural products and fuel, and for defense orders. Strict financial regulation has reduced investment and undermined incentives for output growth.

Types of open inflation

It distinguishes the following varieties:

• cost inflation;
• stagflation;
• inflation of adjusted expectations.

The first is characterized by an increase in wages, which drives up the rise in prices for services and goods (it significantly outpaces the growth of wages). Stagflation occurs when there is a simultaneous reduction in production volumes and an increase in prices. The last type of open inflation occurs when the economy is in a situation of constant expectation of rising prices. Because of this, consumers increase their consumption of services and goods, which means their prices rise.

Creeping, galloping and hyperinflation

The following types of inflation are also distinguished, depending on the rate at which prices in the market are growing.

1. Creeping observed when the rate of price growth annually is 3-4%. It is typical for the economies of developed countries and is a stimulating factor for these countries.
2. WITH galloping We encounter inflation when the average annual growth rate of prices for services and goods ranges from 10 to 50% (sometimes reaching 100%). It predominates in developing countries.
3. Hyperinflation observed when the rate of price growth increases annually by more than 100%. It is characteristic in certain periods of various states experiencing a radical change in their economic structure.

However, we have not considered all types and forms of inflation. We offer another classification of them.

Cost and demand inflation

The following types and types of inflation can be distinguished depending on the cause: inflation of production costs and demand. The latter is a functional type, characterized by an increase in aggregate market prices due to an increase in monetary demand for services and goods of the aggregate consumer (buyer), as well as its “separation” from the aggregate supply. It traditionally occurs when there is excess demand. Considering the types and types of inflation, we note that demand inflation can be due to various reasons.

Causes of demand inflation

It may be due to:

1. Militarization of the economy, as well as increased military spending. The fact is that military products and military equipment do not function on the market. The state acquires it and then sends it to reserve. No money is required to service this product, since it does not change hands.
2. Growing public debt and budget deficit. Either by issuing banknotes or by government loans, the budget deficit is covered. This creates additional funds for the state, and therefore additional demand.
3. Also, demand inflation may be due to credit expansion of banks. The fact is that the expansion of the credit operations of these institutions leads to the fact that the credit instruments of circulation increase, which creates additional demand for services and goods.
4. Another reason - influx of foreign currency into the country, which, as a result of its exchange for the monetary unit of a given country, causes an increase in the volume of money supply, and therefore increased demand.

Thus, demand-pull inflation occurs only when an increase in the price level occurs as a result of an increase in aggregate demand.

Let us now move on to consider cost-of-production inflation. Among its reasons are the following.

Causes of production cost inflation

1. Decreased labor productivity, which causes structural changes or cyclical fluctuations in production. They lead to higher unit costs, which means lower profits. This will ultimately affect the reduction in the volume of a particular production, which means a reduction in supply and, naturally, an increase in prices.
2. Another reason is expansion of services, the emergence of new types with an increase in the share of wages and labor productivity, which is relatively low in comparison with production. This leads to a general increase in prices for various services.
3. You can also highlight high indirect taxes included in the cost of goods, which means an increase in the overall level of costs.
4. Another reason - increase in wages under certain circumstances(for example, an increase in the minimum wage). For such growth, companies are responsible for an inflationary spiral. Price increases, as well as new salary increases, follow the initial increase.

Measures to combat inflation

Surely you are interested not only in the main types of inflation, but also in how you can combat this phenomenon. The main ways to combat it are the following: anti-inflationary policies and monetary reforms.

Currency reform is a partial or complete transformation of the monetary system in the state, which takes place with the aim of strengthening and streamlining monetary circulation. A set of measures to regulate the economy that the state carries out in the fight against inflation is called anti-inflationary policy. Its main ways are as follows:

• regulation of money demand, using the tax and monetary mechanism by limiting the money supply, increasing the tax burden, increasing interest rates in lending, reducing government spending, which leads to a slowdown in economic growth;
• income policy, in which there is parallel control over wages and prices by completely freezing them or limiting their growth, the implementation of which can cause social contradictions.

So, you have learned what the levels of inflation are, its types and measures to combat it. Of course, inflation in the modern world is a very common phenomenon. Each of us involuntarily faces its consequences, whether we want it or not. Therefore, knowledge of topics such as the concept and types of inflation is necessary for everyone.

Inflation- this is a decrease in the purchasing power of funds and their complete depreciation in the future.

As a result of inflation, monetary circulation channels are filled with excess money supply. As a result, one can observe a stable increase in price indicators for various types of goods and services.

Description of inflation in simple words

A situation when there is more money in a country than people need. At the same time, the quantity of goods and services remains at the same level. People stop buying and prices rise, but wages remain the same. Eventually money becomes worthless.

Inflation - information from Wikipedia

Types of inflation

Demand inflation

It arises as a result of excess aggregate demand, the growth rate of which outstrips production. This situation leads to higher prices for consumer goods and an increase in the profits of organizations producing these goods.

There is an expansion of production, additional attraction of economic and labor resources. The income generated by resource owners increases, demand continues to grow, and with it prices. To eliminate a possible shortage, production volume is left at the same level, and prices continue to increase.

Prerequisites: militarization of the economy, fear of the population of increasing prices for consumer goods, government loans, influx of foreign currency.

Supply inflation

A rise in prices due to an increase in production costs, when it is not possible to use all resources, is already supply inflation.

An important factor in this situation is the increase in taxes, duties and fees, changes in the world market, and the rise in currency prices. In such a situation, there is no glut of demand, production suffers a lot of losses due to the fact that the increase in prices for finished products lags behind costs.

Reasons such as an increase in wages, a rise in the price of raw materials can lead to a significant increase in costs per unit of production. As a result, the closure of production due to lack of profit and exorbitant growth of losses is inevitable.

In such situations, government intervention is necessary - reducing various fees and duties, providing subsidies can have a positive impact on the development of production.

The price of goods rises if wages rise, which in turn leads to an increase in costs, and this, again, requires higher wages. The situation is similar to a spiral, which can be stopped either by fixing prices or by stopping wage increases.

In the current market conditions, supply-side inflation is inevitable and its causes may be: an excess of expenses over income, a spiral of “increasing earnings-increasing prices,” and the transfer of inflation from other countries.

Other types

The emergence of a shortage of goods in conditions of containing price levels indicates the emergence of hidden inflation.

Imported inflation– this is an increase in prices due to the uncontrolled influx of foreign currency into the country and rising import prices.

Exported inflation– an increase in prices, depending on the characteristics of international relations that can affect money circulation within the country.

Causes and antecedents of inflation

Today, the emergence of an economic phenomenon called inflation can be preceded by a number of factors. And this, in turn, can only confirm the fact that inflation cannot be positioned solely as a monetary phenomenon.

It is also an economic and even socio-political phenomenon. It can be influenced by public sentiment and social psychology. For all these reasons, the expectation of inflation almost always leads to this negative economic phenomenon. Recently, it has become one of the permanent instruments of the market economy.

Inflation can be caused by the complication of the structure of commodity production, as well as an increase in its growth. One of the reasons for the emergence of this phenomenon can also be called a situation in which, under the influence of monopolistic enterprises, the pricing procedure changes or the scope of price competition is sharply reduced.

The formation of inflation is also facilitated by a certain situation in which social transfer systems have taken on a universal form. It should be noted here that an increase in production efficiency is manifested in a general increase in the amount of profit and the level of average income of production participants, and not in a decrease in prices. At the same time, the upward dynamics of price indicators is often not only a prerequisite for further inflation, but also inflation itself.

Another reason for this economic phenomenon can be called an increase in government spending, leading to the formation of a budget deficit.

Inflation is a long-term process of gradual decline in the purchasing power of money. The general level of price indicators has a constant upward trend. Much depends on the level of inflation. The higher its indicator, the more negatively it can affect each individual citizen of the country.

• Creeping inflation is normal. It is determined by a price increase of five percent over one calendar year.
• Galloping inflation is characterized by an increase in prices by 30-100 percent per year.
• Hyperinflation could be catastrophic for the entire economic system. With it, price increases are determined by thousands of percent of the original cost of the product.

Without much exaggeration, inflation can be called one of the main destabilizing factors for the entire market economy. An increase in the level of this phenomenon can lead to a number of difficulties, the elimination of which may require a long period of time.

Consequences of inflation

The consequences of inflation can be catastrophic. In particular, this process leads to the actual depreciation of all available cash reserves in the form of deposits, loans, and bank account balances.

Securities also depreciate in value. This phenomenon results in a divergence in estimates between cash holdings and cash flows. In turn, all this can lead to an aggravation of the problem of issuing money.

Inflation can distort profitability indicators, interest rates, etc. It is important to note that an increase in price indicators almost always initiates a fall in the exchange rate of the national currency.

Measuring Inflation

Inflation processes in the country are assessed using inflation indicators. These include price indices, which are calculated for a certain period - month, quarter, year. They reflect the price relationship over time.

The main idea of ​​​​calculating price growth indices is to calculate the inflation rate of the current period relative to the prices of the base year, which are equal to 100%.

To determine the inflation index, it is necessary to know statistical data on the value of the market basket in the current year and determine its relationship to the value of the same basket in the base year. Its level can be measured by dividing the total cost of goods and services in the current period by the cost of the base year, multiplying all this by 100%. This will also allow you to determine the percentage reduction in the value of money.

It should be noted that measuring inflation in the form of the ratio of the price of the consumer basket of a given year to the price of the consumer basket of the previous year hides the actual increase in prices in the country, because this ratio hides last year's price increase.

Indicators

Inflation indicators include: Laspeyres, Paasche and Fisher indices.

Lespeyres index

The Lespeyres index (consumer price index) shows changes in the price level of goods and services in constant demand. This includes essential goods that make up the consumer basket. This is the ratio of consumer expenditures on the acquisition of the same set of consumer goods, but at current prices, to expenditures on the acquisition of goods and services of the base period.

The Laspeyres index does not take into account possible declines in prices for some goods, so its value is overestimated and does not reflect the real standard of living of the population.

Paasche's formula

The producer price index is calculated using the Paasche formula. It compares the prices of two periods for all goods and services sold by the final consumer. This indicator can be used to calculate changes in prices for goods and services included in the country’s GDP.

The disadvantage of this index is that prices for some services or products decrease, the index gives an overestimated result, and if prices increase, it gives an underestimate.

Fisher index

To more accurately reflect, using inflation indices, the dynamics of prices and, accordingly, the dynamics of the cost of living (the real costs of consumers for the purchase of certain sets of goods and services), the Fisher index is used. This index averages the Laspeyres and Paasche indicators and thereby gives a more accurate estimate.

Three main parameters are calculated:

1. Wholesale Price Index shows changes in the average level of sales prices for products of enterprises in various industries, except for wholesale trade;
2. Retail Price Index calculated either as an aggregate price index for goods in retail trade, or only for socially significant goods, which reflects the standard of living of the population;
3. The GNP deflator is determined by the volume of final products that forms the value of the gross national product; at prices for essential goods; at the cost of fixed assets needed by enterprises; tariffs for services provided to the public sector; foreign trade prices. Reflects the real level of inflation in the country.

Regulation and management of inflation

Managing inflation is not a simple process; it depends entirely on the decisions of the country's government. Here the situation can be assessed in two ways - it is necessary to restrain the spiral of inflation and support producers, creating favorable conditions for them to develop their business.

Stabilizing the growth of prices and incomes of the population is the main task of the state’s economic sector. In the event of an active fight against inflation, a drop in GDP growth rates may occur. This policy is called deflationary. Therefore, adjusting inflation indicators should be approached comprehensively, taking into account all possible factors; it is necessary to correctly identify the causes, methods of manifestation and ways of its impact on economic processes. For a favorable economic situation in the country, inflation and the state budget deficit, as well as the monopoly of suppliers and manufacturers, are usually stimulated.

In order to control inflation, two types of economic policies are used:

1. direction to reduce the budget deficit, that is, the emission of money supply is adjusted in accordance with the growth of GDP indicators;
2. regulation of prices and incomes of the population by determining the level of the subsistence level or consumer basket, which must be consistent with the dynamics of price growth.

If the country's government pays attention to some measures to reduce inflation, the economic situation in the country will be under control.

The most effective way to influence the level of inflation is to use a policy to influence the interest rate or refinancing rate of central banks in a modern market economy.

Reducing the difference between money and goods should be done through agricultural financing: issuing loans secured by the future harvest, setting government purchase prices for resources consumed in agricultural production to maintain the profitability of producers of a given product and the possible solvency of agricultural workers.

The development of the investment field will increase the turnover of the country's own funds.

Unhindered connections between enterprises on the supply and sale of products or raw materials at the interregional level contribute to more efficient development of state production as a whole and growth in GDP levels.

Establishing an income tax for enterprises in accordance with its profitability, rather than establishing fixed rates, will have a significantly positive effect on the production volumes that the business owner will aim at.

The gradual increase in financial literacy of the population has brought into use many terms that were previously used exclusively by specialists. On television and on the Internet you can often hear about such a concept as inflation. Many experts believe that inflation appeared precisely when monetary relations themselves appeared. Previously, it was believed that inflation only manifested itself in critical situations for the state, for example, floods, famines, and wars. Now inflation is an important process in the economy of any state. In this article we will talk about the causes and consequences of inflation in Russia.

History of the concept of inflation

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As mentioned above, during periods when the state needed to take measures to get out of difficult economic situations, it began to issue additional amounts of money. In case of wars, this was done for the purchase of weapons, in case of famine, for the purchase of food, etc. The money supply that is not backed by goods sooner or later depreciates and its purchasing power decreases. As a result, prices begin to rise while the level of income of the population remains unchanged.

The term “inflation” was first used during the American Civil War of 1861–1865, and began to be used widely after the First World War, when many participating states faced serious economic problems. Translated from Latin, “inflation” is inflation, which quite accurately characterizes this process in the economy.

What is inflation and how does it work?

Thus, inflation is the depreciation of money caused by an increase in the money supply. From this we can conclude that in economically prosperous countries the inflation rate should tend to zero. However, in reality, a completely opposite picture is observed. And most importantly, the higher the rate of economic development, the higher the likelihood of rising inflation.

Inflation occurs not only in economically prosperous countries; for a better understanding, I will give an example. As you know, a developed, stable economy is attractive to businessmen and investors. Large international companies are constantly exploring new markets, creating branches, and attracting specialists. But some resources, especially human resources, are limited. Therefore, in order to hire highly qualified specialists, company management is forced to increase wages, attracting additional foreign currency money supply to the state.

The amount of money in circulation among the population increases, thereby increasing its needs, which, in turn, causes prices to rise. This example may not be a classic one, but it most clearly explains the mechanism of inflation in an economically prosperous state.

In most cases, inflation is caused by exactly the opposite reasons. During periods of crisis, the level of the economy declines. The income of enterprises and private businesses, which are the main sources of tax revenue, is declining. The state is forced to cut expenses in the budget, causing negative sentiment among the population. In order to even out the situation, the state either takes loans from more prosperous states or companies, or prints additional money. In both cases, the total supply of money grows, causing its depreciation and rising prices within the country.

Today's economy offers a division into three types of inflation, depending on the magnitude of price increases:

• creeping (increasing) - with an average annual price increase of 5-10%;
• galloping – with price increases from 10 to 50% per year;
• hyperinflation – price increases of 100% per year or more. This type can also be characterized by a 50% increase in prices per month.

Economically developed countries tend to have rising inflation with small annual currency depreciations. In developing countries, inflation is primarily galloping or hyperinflationary. Moreover, developing countries can be classified into several categories, depending on the economic balance, methods of combating inflation and, accordingly, its consequences.

For example, Argentina and Brazil have very unbalanced economies and the priority measures to combat inflation are the use of the printing press, systematic indexation of funds and periodic depreciation of the national currency. The result of this policy is inflation of more than 100% per year. At the same time, Colombia, Venezuela, Iran, Egypt and some others are using credit expansion. Inflation in these countries is at the level of 20-40%. India, the Philippines and Thailand have significant financial earnings from exports and have inflation ranging from 5 to 20%. And in the fourth group there are states such as Singapore, the United Arab Emirates, South Korea, Saudi Arabia, which have growing inflation and exercise strict price control.

If we classify the causes of inflation, according to these criteria we can distinguish two more types of inflation:

• demand inflation;
• cost inflation.

The first occurs when the population has an excess amount of money, as in the example above, and production is unable to satisfy the high level of demand. This creates shortages and a corresponding rise in prices.

Cost-push inflation is caused not by growth, but, on the contrary, by a fall in demand. At the same time, costs can increase both due to increased wages, due to rising prices for raw materials and energy resources, and as a result of the activities of monopolies. Inflation, which combines characteristics of both types - costs and demand, is identified by economists as a separate type - structural inflation.

Inflation in Russia was first recorded in the 50-60s of the last century. But at that time it was of a hidden nature and was not voiced anywhere. The cause of inflation in the USSR was the acute discrepancy between the prices of manufactured goods and the real prices of raw materials. The result of inflation was a total deficit. They started talking openly about inflation at the beginning of 1992, when prices were allowed to float freely (with the exception of prices for some products and energy resources).

Today's inflationary realities are as follows: Russia clearly has cost-push inflation, dictated by the unlimited arbitrariness of natural monopolies, administrative barriers and corruption charges, rising energy prices, a high level of trade monopolization, and expensive loans. That is, inflation in Russia does not have a monetary cause. Thus, until these reasons are eliminated, inflation expectations in Russia will be high.

Inflation - what to do?

The first sign of inflation for an ordinary person is an increase in expenses for the usual lifestyle, provided that income has remained unchanged or even increased.

I will list options for countering the negative consequences of inflation:

• Accumulation of cash. You should regularly save some portion of your income. According to Kiyosaki’s recommendations, this is 10-30% of total revenues (see);
• Converting rubles into a currency whose credibility is beyond doubt. I lean towards the dollar, euro and Swiss francs;
• Storing money in bank deposits with interest and capitalization that can compensate for at least part of the inflation. If you have free money on a bank card, then it is better to transfer it to a deposit or savings account;
• Investing in reliable instruments (stocks, bonds, etc.).

Inflation negatively affects the purchasing power of money, industrial production volumes, and long-term investments. As a result of a decrease in the competitiveness of products, the share of foreign products increases. At the same time, budget revenues are declining, the unemployment rate is rising, and public debt is increasing. As a result, the population is trying to get rid of cash by investing it in valuable goods or foreign currency. Particularly affected are people receiving a fixed income in the form of salaries in the public sector (pensioners, students). But inflationary processes can also be beneficial for some people with loans, since as inflation rises, the actual size of the loan decreases. In any case, it is important to understand the essence of this socio-economic phenomenon in order to successfully counter its negative impact.

Inflation, as well as unemployment; represents one of the most serious macroeconomic problems. As an economic phenomenon, inflation appeared almost with the emergence of money, with the functioning of which it is directly related.

Inflation(from Latin inflation - inflation, swelling) - a continuous increase in the average price level in the economy, depreciation of money, occurring due to the fact that there is more of it in the economy than is needed, i.e. The money supply in circulation “swells.”

A more rigorous definition of inflation, taking into account the causes and some consequences of the increase in the average price level in the economy, sounds like this:

Inflation- an imbalance of supply and demand (a form of disruption of the general equilibrium in the economy), manifested in rising prices and depreciation of money.

The process opposite to inflation is deflation(deflation) is a stable trend towards a decrease in the general price level.

There is also a concept disinflation(desinflation), which means a decrease in the rate of inflation.

There are many types and types of inflation.

So, from the point of view of the rate of price growth, moderate, creeping, galloping and hyperinflation are distinguished.

Moderate inflation(price growth is usually 3-5% per year, does not exceed 10% per year) does not pose a serious threat to the economy. Prices in this case rise gradually but steadily, at a moderate pace (by about 10% per year). The value of money is preserved, there is no risk of signing contracts at nominal prices. In industrialized countries, it is viewed as part of the normal functioning of the economy and does not cause much concern. This kind of inflation is also called natural, since such a rise in prices does not interfere with the economic development of the economic system and does not create problems for either producers or consumers.

Creeping inflation(price growth from 10 to 20% per year) requires adjustment of the state’s monetary policy, since there is a danger of its transition to galloping inflation. Galloping inflation(the rate of price growth ranges from 20% to 200% per year) can be observed in the economic system for quite a long time. Such a pace can cause severe economic and social consequences (a drop in production, the closure of many enterprises, a decrease in the standard of living of the population, etc.), contracts are “tied” to rising prices, and money quickly materializes. Most often, the functioning of the economy in conditions of such inflation is depressive; there are no incentives for the development of the business sector, since the profits received are “eaten up” by inflation. This is where serious economic disruption occurs. Money quickly loses its value, and the population quickly materializes it. Financial markets are collapsing. Galloping inflation requires a radical revision of monetary policy.

Hyperinflation(annual price growth exceeds 200%) requires decisions of not only an economic but also a political nature, since such high inflation rates mean the probable economic collapse of the country, primarily related to commodity-money relations. The world record was hyperinflation in Hungary (August 1945 - July 1946), when prices rose on average almost 20 times every month. Hyperinflation causes the collapse of the monetary system. Money ceases to adequately perform its functions, the largest enterprises become unprofitable and unprofitable. Hyperinflation paralyzes the economic mechanism, since the effect of flight from money in order to transform it into goods sharply increases. Economic ties are being destroyed and a transition to barter exchange is taking place.

According to the degree of predictability they distinguish expected (predicted) inflation And unexpected inflation, i.e. sudden. Naturally, expected inflation is more preferable than unpredictable inflation, since preliminary information about possible inflation makes it possible to develop and take a number of measures to prevent its negative consequences. Expected inflation can be forecast for a certain period, or it is planned by the government of the country.

By its nature, inflation can be open, suppressed and hidden.

Open (explicit) inflation manifests itself in a steady increase in the price level and is typical for countries with market economies. It does not suppress or destroy the market mechanism.

Suppressed inflation usually caused by general government control and suppression of the market mechanism, occurs in countries with planned economies or in countries with strong government regulation that turns into general control. The state takes on the function of controlling prices, artificially restraining them at a level, most often below the equilibrium level. The result is a global gap between supply and demand. Having passed a critical point, this gap turns into inflationary, and a stable deficit arises in the economy. Under these conditions, the movement of commodity masses from the official economy to the shadow economy begins. Suppressed inflation gives rise to a shadow market, since it is based on the gap between administratively set prices and higher black market prices, which equalize the volume of supply and the volume of demand. Thus, if open inflation is expressed in rising prices, then suppressed inflation is expressed in shortages in the goods market and the development of the shadow market, suppressed inflation manifests itself in an increase in savings of the population and firms. It is very difficult to fight this type of inflation, since market mechanisms do not work. To combat suppressed inflation, it must first be turned into open inflation. Very often suppressed inflation is called hidden.

Some economists distinguish hidden inflation separately, believing that hidden inflation is associated with a deterioration in the quality of products with unchanged prices or with the “washing out” of cheap goods from production, and therefore from consumption.

If the prices of all goods and services produced in a society grow approximately equally, then we speak of balanced inflation. If prices for different goods and services change in different proportions, then in the economy inflation is unbalanced.

The best option for any economy is open, balanced, moderate and predictable inflation. But in reality, such a situation arises extremely rarely. Therefore, it is believed that it is preferable to have open, balanced and predictable inflation, albeit with sufficiently high growth rates of the average price level and economy, than to have low inflation (up to 20% per year), but suppressed, unpredictable and unbalanced.