FinGurú - The paradox of inflation with poverty by horacio gustavo ammaturo

By observing the innocence of children, who believe that how many more notes have more things they can buy, we can understand the false logic of those who promote inflationary policies. .Without analyzing the purchasing power of money, identifying the ability of notes to meet needs and desires is an abstract issue.Who knows what it is to live with inflation we know the ephemeral of the value of money by itself.It is a basic rule of economics and business that those who offer goods or services try to get the highest price for them.It is natural that one tries to gain more, both by increasing the gain per unit and increasing the volume in sales, these concepts are known as utility and scale, which together define the profitability of a business.For example, if an entrepreneur offers a product to 100 pesos and sell all that it produces, you can make two decisions to earn more money:

Produce more to increase your market share and lower your costs by scale-related savings or
Go up the price to see where your customers convalidate it.

In the first case, it should make investments, increase the plant, hire more personnel, buy more raw material, invest and expand its labor capital.In the other alternative, you just need to tap the price list and wait for your customers’ response.This is where environmental conditions are defining.If there are difficulties or insecurities in making investment decisions, it is safe to opt for the variant of maximizing price profitability rather than scale.Then it will take your product from 100 to 200 and from there to 500 and maybe 1000. Until some day the market says enough.In this model that boast a place of privilege are the offerings of goods and services of first need and mass consumption, in great traits, food, cleaning, perfumery and pharmacy. These things that “always” should buy.When we find ourselves within an inflationary economy, the main tool to lower prices is to stop consuming.Those who reduce the diagnosis of the causes of inflation to the monetary phenomenon attribute only to the circulant the responsibility of rising prices, but there are other factors that determine these processes.We analyze different scenarios:

The central bank sends money to accumulate it in its accounts. This increase does not move at prices, as consumers would have the same weights on their system to spend.
The money issued is “districtly attributed” to a company. In this case, the purchasing power of this company would take advantage of the others making it “more competitive”, so it would have its competition. However, they could only increase the prices of the things that this company acquires
However, if the money is distributed among the majority of the inhabitants, fundamentally, among those who have less, the consumption will be directed, especially in the products of first need, as a result, those companies will be those who accumulate greater stock of weights.

From here, of course, the monetary phenomenon begins to have greater presence. By being superabundant weights, companies know they will again have, even rising prices, so they despise them. This leads to that, to keep them, demanden higher prizes (rates of interest) or directly undoing to pass to other less offered alternatives (in our economy, dollars).So we are faced with the paradox of inflation with poverty.We know that the monetary expansion that is produced to finance direct assistance policies such as AUH or indirect, such as the never-ending entries of public officials, serve to ensure that poverty and poverty are smaller.On the other hand, we also know that if monetary emission is primarily intended to sustain the consumption of basic goods and services will be inflationary.Perhaps, using our human body as an example is useful.Let us imagine that our circulatory device resembles the monetary system.The arteries and veins would have their parallel in the means and systems of payment and blood processing in money.Let us assume that for some reason, there is an artery that leaves the system a great flow of blood.As much transfusions as they do will always be insufficient. While some parts of the organism receive the blood donated, the sector that is after the ulcerated artery lacks irrigation, that is, however much the effort is made to achieve new and more donors, there are parts of the system that are without the vital fluid.The same happens with the economy after long emission processes that derive in inflationary scenarios.The orthodoxy is without tools.The poor should be as poor as to stop consuming the basic products, these parts of the human body that lack irrigation. However, the rich accumulate so many weights that despise them, represented by these arterial escapes.However, there is a solution.Digital currency technology allows segmenting the circulatory device in independent and decentralised circuits, i.e. generating transactional payment ecosystems so that monetary emission has a correlate in increments in the supply of goods and services and in the generation of employment.Part of expenditure and public investment can be used in the market reserve for proximity trades and producers of regional and small and medium-sized enterprises.The traceability of digital currencies and the possibility of its direction will revolutionize monetary, fiscal and fiscal models.In addition to the presidential candidate, I will embrace the digital weight flag, sovereign payment processing systems based on blockchain It will be necessary for any of them to get out of this crisis that has amassed the tools to get out of poverty without removing it and that, despite having an economy that declines, remains inflationary.

10/30/2023 - economy-and-finance

The paradox of inflation with poverty

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