Crowding-Out...

Article;
Staggered Rise in Diesel Price will Squeeze Inflation


Comment; I agree with targeted subsidy but what will happen to transport costs. If fiscal deficit fuels inflation then, “how exports become uncompetitive?” Inflation means more money in circulation it gives exports a competitive advantage in terms of the value of money and also the value in terms of foreign currency. We can see this example in India itself; inflation is high and currency depreciating. Depreciations give country competitive advantage. If we can not exploit the situation due to higher interest rate, is a not a thing to be amazed… Actually it is a self correcting process but it is not working due to central banks intervention. Economy’s demand needed to be restricted because people are getting more and are spending more. Investment needs to be recycled to the good and services market through savings. But since now we are spending more we have less to save. Interest rates by banks are enough to attract depositor but unable to spark investors due to higher interest rates. Moreover the demand is coming from the bottom of the pyramid due to employment creation in the economy. The chain breaks where high interest rates keep a tab on investment. The main problem is employment creation and little inflation motivates the market. Public employment creation is crowding-out private employment creation. We have to decide which one, private or public; employment creates reasonable inflation levels…