THE Jakarta Post made a headline on Thursday 2nd August that “Inflation up for first time in '07”. Based on report by The Central Statistics Agency (BPS or Badan Pusat Statistik) Wednesday that Indonesia’s inflation is up, marking the first definite uptick in inflation this year, with food prices still remaining stubbornly high as compared to July last year, also rose slightly to 6.06 percent. Core inflation, which excludes volatile food prices and administered fuel prices, paced up to 0.71 percent month-on-month and 5.75 percent year-on-year.
BPS chief Rusman Heriawan in Jakarta Post said that inflation was part of the "usual cycle for this time of the year" although acknowledging July's inflation uptick. He added that "Rising inflation may also indicate more activity in the economy". Headline inflation during the same period in 2005 saw similar increases in both monthly and on-year inflation, but 2003 and 2006 saw disinflation during the same period.
Nevertheless, the inflation uptick in July received a cool response from the financial markets, which saw the Jakarta Stock Exchange Composite Index dropping to 2,256.31 points, and the rupiah weakening to Rp 9,285 against the dollar.
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INFLATION is an increase in the price of a basket of goods and services that is representative of the economy as a whole. In mainstream economics the word “inflation” refers to a persistent rise in the general price level, as measured against a standard level of purchasing power. A similar definition of inflation can be found in Economics by Parkin and Bade: Inflation is an upward movement in the average level of prices. Its opposite is deflation, a downward movement in the average level of prices. The boundary between inflation and deflation is price stability. A simple commonly used definition of the word inflation is simply "an increase in the price you pay or a decline in the purchasing power of money". In other words, Price Inflation is when prices get higher or it takes more money to buy the same item. Inflation is measured by the BPS and Bureau of Labor Statistics in the United States using the Consumer Price Index. Gregory Bresiger –maybe he’s a economist- wrote that “Inflation is Legalized Robbery”.
It would seem obvious that low inflation is good for consumers, because costs are not rising faster than their paychecks. But recently commentators have been saying that "Low inflation introduces uncertainty". This is nonsense. But there is no guarantee that if inflation is high it will not go higher... or lower. So there is the uncertainty.
But disinflation (decreasing levels of inflation) also encourages people to reduce high debt loads and become financially responsible. As inflation comes down it becomes less advantageous to carry high debt loads. This is probably the reason for the current "hue and cry" among the popular press. The writers are probably up to their ears in debt and hoping to pay it off with ever cheaper dollars.
Inflation is the loss in purchasing power of a currency unit such as Rupiah, usually expressed as a general rise in the prices of goods and services. This way of looking at inflation is mistaken. The prices of some items always are rising or falling relative to others. This is a natural feature of the way a market economy adapts to changes in supply or demand. Rapid price increases within a single sector, though often labeled "sectoral inflation," are partly the result of an adjustment in relative prices and partly a manifestation of the overall inflation rate. They may have no causative significance whatever. When we watch the tide come in at the beach, we know that it is not caused by the waves, however forceful they may be. Inflation is not simply the sum total of a collection of independent price changes, as the arithmetic of the CPI implies. It is the degree to which all of those prices move in concert.
Economists who view inflation as a very serious problem point to what they call the "inflation tax." By this they mean the reduction in the purchasing power of the cash balances held by the private sector—like a wealth tax. This tax is a drag on the economy—an "efficiency loss"—because it induces people and businesses to economize on cash balances, making it more difficult to participate in the money economy.
Economic losses associated with the inflation tax and other distortions are known as the "welfare cost of inflation." At one extreme of the debate, Harvard economist Martin Feldstein has claimed that the present value of the losses that result from unending inflation may be infinite! His argument is that each year the cost to the economy grows in proportion to society's money balances. Because the rate of growth of money balances exceeds the interest rate he uses to calculate the present value, the present value is unbounded.
I hope the Government of Indonesia (GoI) will continue to maintain rice prices, maybe at between Rp 4,300 and Rp 5,000, -according to Coordinating Minister for the Economy counted, told by Bayu Krisnamurthi one of Deputy. The recently weakening rupiah may also have led to higher import costs for foodstuffs. Prices of processed food and beverages rose 0.4 percent, but only contributed 0.07 to July's inflation. Spending on the housing and utilities category, whose prices rose by 0.32 percent in July, added 0.08 points to the monthly inflation. It will also be taken into consideration by the central bank in deciding whether to continue trimming its benchmark Bank Indonesia (BI) rate from its current level of 8.25 percent.
BPS chief Rusman Heriawan in Jakarta Post said that inflation was part of the "usual cycle for this time of the year" although acknowledging July's inflation uptick. He added that "Rising inflation may also indicate more activity in the economy". Headline inflation during the same period in 2005 saw similar increases in both monthly and on-year inflation, but 2003 and 2006 saw disinflation during the same period.
Nevertheless, the inflation uptick in July received a cool response from the financial markets, which saw the Jakarta Stock Exchange Composite Index dropping to 2,256.31 points, and the rupiah weakening to Rp 9,285 against the dollar.
---
INFLATION is an increase in the price of a basket of goods and services that is representative of the economy as a whole. In mainstream economics the word “inflation” refers to a persistent rise in the general price level, as measured against a standard level of purchasing power. A similar definition of inflation can be found in Economics by Parkin and Bade: Inflation is an upward movement in the average level of prices. Its opposite is deflation, a downward movement in the average level of prices. The boundary between inflation and deflation is price stability. A simple commonly used definition of the word inflation is simply "an increase in the price you pay or a decline in the purchasing power of money". In other words, Price Inflation is when prices get higher or it takes more money to buy the same item. Inflation is measured by the BPS and Bureau of Labor Statistics in the United States using the Consumer Price Index. Gregory Bresiger –maybe he’s a economist- wrote that “Inflation is Legalized Robbery”.
It would seem obvious that low inflation is good for consumers, because costs are not rising faster than their paychecks. But recently commentators have been saying that "Low inflation introduces uncertainty". This is nonsense. But there is no guarantee that if inflation is high it will not go higher... or lower. So there is the uncertainty.
But disinflation (decreasing levels of inflation) also encourages people to reduce high debt loads and become financially responsible. As inflation comes down it becomes less advantageous to carry high debt loads. This is probably the reason for the current "hue and cry" among the popular press. The writers are probably up to their ears in debt and hoping to pay it off with ever cheaper dollars.
Inflation is the loss in purchasing power of a currency unit such as Rupiah, usually expressed as a general rise in the prices of goods and services. This way of looking at inflation is mistaken. The prices of some items always are rising or falling relative to others. This is a natural feature of the way a market economy adapts to changes in supply or demand. Rapid price increases within a single sector, though often labeled "sectoral inflation," are partly the result of an adjustment in relative prices and partly a manifestation of the overall inflation rate. They may have no causative significance whatever. When we watch the tide come in at the beach, we know that it is not caused by the waves, however forceful they may be. Inflation is not simply the sum total of a collection of independent price changes, as the arithmetic of the CPI implies. It is the degree to which all of those prices move in concert.
Economists who view inflation as a very serious problem point to what they call the "inflation tax." By this they mean the reduction in the purchasing power of the cash balances held by the private sector—like a wealth tax. This tax is a drag on the economy—an "efficiency loss"—because it induces people and businesses to economize on cash balances, making it more difficult to participate in the money economy.
Economic losses associated with the inflation tax and other distortions are known as the "welfare cost of inflation." At one extreme of the debate, Harvard economist Martin Feldstein has claimed that the present value of the losses that result from unending inflation may be infinite! His argument is that each year the cost to the economy grows in proportion to society's money balances. Because the rate of growth of money balances exceeds the interest rate he uses to calculate the present value, the present value is unbounded.
I hope the Government of Indonesia (GoI) will continue to maintain rice prices, maybe at between Rp 4,300 and Rp 5,000, -according to Coordinating Minister for the Economy counted, told by Bayu Krisnamurthi one of Deputy. The recently weakening rupiah may also have led to higher import costs for foodstuffs. Prices of processed food and beverages rose 0.4 percent, but only contributed 0.07 to July's inflation. Spending on the housing and utilities category, whose prices rose by 0.32 percent in July, added 0.08 points to the monthly inflation. It will also be taken into consideration by the central bank in deciding whether to continue trimming its benchmark Bank Indonesia (BI) rate from its current level of 8.25 percent.
So when the inflation is high it is usual phenomenon or 'useless' for everybody? Depend on whose benefit. Usual phenomenon if the inflation will improve ont the next season by deflation, but useless if it will continue and make a lot of people worry. Especially for the students who paying higher school fees and more for textbooks for the new academic year because cranked up consumer prices.
Mainstream economists' views of the causes of inflation can be broadly divided into two camps: the "monetarists" who believe that monetary effects dominate all others in setting the rate of inflation, and the "Keynesians" who believe that the interaction of money, interest and output dominate over other effects. Keynesians also tend to add a capital goods (or asset) price inflation to the standard measure of consumption goods inflation. Other theories, such as those of the Austrian school of economics, believe that inflation is caused by an increase in the supply of money by central banking authorities
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