Abstract: Inflation is one of the most common phenomena in economic cycle, which is mainly caused by excessive money supply, devaluation of local currency and rising prices of raw materials. Historically, whether it is moderate inflation or hyperinflation, the necessities of life are the first to rise. But we need to look at the essence through the phenomenon and understand the economic logic behind it.
1, the goods just needed are the easiest to increase in price. There are many reasons and types of inflation, but there is only one phenomenon, that is, money is worthless. At this time, people will have a strong motivation to exchange their cash for commodities. I can live without a watch and a car, but I can't live without daily necessities. Therefore, when people go to snap up these necessities, prices will naturally rise. For example, during the period of 1948, the prices of daily necessities soared in Shanghai controlled by the Kuomintang and now Venezuela. Explained by the simplest theory of economics, it is the problem of supply and demand. Many times the necessities of life are in short supply, so after inflation, it is they who are most likely to raise prices.
2. The correlation between the price of ordinary industrial products and inflation is weak. This means that when inflation occurs, the price of industrial products will not necessarily rise. For a simple example, for example, a refrigerator is also 2000 yuan. Before 10, you could only buy the old-fashioned double-door refrigerator, which was very small. Maybe we can buy a three-door large-capacity refrigerator now. Another example is bicycles, which used to be big items at home, but now no one wants bicycles all over the street. Selling used cars costs tens of dollars, which is similar to a fast food. With the development of industrial technology for decades, the prices of industrial products have not increased much, and some have even declined. In these decades, the inflation rate has doubled. According to the principle of economics, the more output value created per unit time, the lower the price of unit goods, which is the truth.
3. The price elasticity of non-essential goods is high. Although there is inflation in China, on the whole, people have more wealth, so cars, watches, headphones and other non-essential items are becoming more and more common. But if it is hyperinflation, then non-necessities become less important, that is, non-necessities are highly sensitive to inflation and deflation, and even macroeconomic prices. The economy is good, everyone has money and car sales are high; When the economy is bad, cars are unsalable immediately. For example, during the trade war last year, the capital market was full of sorrow, high-end exports suffered the most, trading companies closed down and laid off employees.
4. The prices of safe-haven assets such as gold and jewelry rose. As we all know, gold is the hard currency in the world. Even if the country dies and the currency becomes a piece of waste paper, gold is still valuable. Therefore, whenever geopolitical, war, inflation and other risk factors rise, gold as a safe-haven asset will always be favored by funds, making its price rise. In addition, jewelry, collectibles, etc. It also plays a certain role in maintaining value during inflation.
As for why? Because they all have the same characteristics, or economic characteristics, namely scarcity and intrinsic value. The national currency itself is just a piece of paper, which is valuable because it is supported by national credit; Gold and silver are naturally valuable, that is to say, gold and silver are already valuable when they are underground and have not been excavated, which has nothing to do with exchange rate, economic situation, war and other factors.
At present, China's M2 and prices have increased a lot, but the economy has been in a stable operating range. Moderate inflation is actually beneficial to the economy, indicating that the economy is developing. As long as the debt is well controlled, everything is so beautiful.