The developed countries
have at one side depressed agricultural income shares by subsidizing price
movements or volatility and real profits by restricting agricultural income,
but also cutting real wages by letting inflation in the other sectors to grow
due bottlenecks after the trade off which is like reservation and manipulation,
double loss to the economy in terms of demand supply and growth expectations,
which has restricted investment and employment in the economy, despite free
access to the Capitalist to commodity stocks and other stocks which are only
benefited by price volatility, but not lone farmers and the lower class. This
is all done in the name of exports… This is also true for the Labour Class or Industry;
their nominal wages are cut by the Central banks due to inflation through
higher rates after full employment which also curbs supply. Capitalist is also
at loss in terms of higher nominal interest rate and labour because of lower nominal
wages. At zero interest rate supply would catch demand faster even after full
employment through imports or redistribution of labour to the other Productive
sectors which could lower cost in the economy, also due to higher price and
wage expectations, and other prices are expected to increase real wages and
profits too, because borrowing cost and prices have come down which is
significant for higher supply expectations in the future… Lower value of money
due to inflation affects everybody in the sameway and reduces demand and supply
for the economy in the face of falling population growth rate and the potential
growth rate and slow innovation. The above is true for the Global economy, too……..
Lower value to money has reduced investment and employment everywhere… It is
not true that inflation cuts real variables to increase competitiveness, but it
reduces demand by lowering savings and investments and increasing interest rate
hikes which starts a vicious DEBT cycle which increases volatility between high
demand and high supply creating DEBT or TRADE CYCLES…
The UPA government back
in power never curbed export of cereals which could control cost to the economy
and increase real wages and demand and growth and which also increased nominal
interest rates too much which stifled the Supply-side too resulting in a
downward spiral of growth and rising NPAs… However, exports increased little, but
at cost of huge domestic demand which destruct the economy post the faster
growth after the Recession and Stimulus 2008. Despite all the supply side constraints
on the economy and gross mismanagement with the data gap on major variables
like unemployment and inflation the previous government was targeting growth in
a black hole…….. It transmitted higher food inflation to others by increasing
the rate hike cycle instead of providing food supply security and other supply
side reforms… Lower borrowing cost could have helped, but government diverted resources
for other productive sectors, again… increasing costs and prices the
ECONOMYWIDE…
True, the developed
countries have cut on real wages to increase competitiveness which has reduced
demand for INDIAN exports and other counties, too... In short, the rest of
GLOBE and that has also cut demand in the developed counties... EVERYBODY
DEMAND GOES DOWN JUST TO IMPROVE EXPORTS OF JUST THE DEVALUING COUNTRY... It
has reduced the share of the Peasant Class everywhere... Means lower demand for
the other INDUSTRY'......
Public capital and
labour stockholding should be used to lower prices by optimizing supply through
investment and employment and increase productivity and competiveness of the economy by lowering
interest rate, wage demand and exchange rate to increase demand and growth expectations...
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