INFLATION-IS GREAT(ER) DEPRESSION AHEAD????

World has visited many recessions and has seen 2 great depressions. One in 1873 and the other one soon after the 1st world war i.e. in 1929.

These great depressions had something in common. they both were led by decreasing buying power, excess supply further leading to shut down of industries, featuring DEFLATION landing into a vicious circle of depression,

no Jobs then no money in the hands of people. then low purchasing power. No purchasing power, so no demand of goods available in huge supply, leading to loss of job of masses, leading to shut down of industries.

World learned a lot from these two Grear Depressions.

Now came same situations in the year 2008. As Govts of different economies has lessons from history, they took measures to deal with them.

They succeeded in stopping the Depression led by deflation.

Now I fear, new history will be written. There will be a Great Depression in the world, led by INFLATION.

To combat deflationary trend of recession, all over the world fiscal deficit was allowed to grow wild. It is being financed by printing new currency. These additional currency was printed without any value addition to the real growth. However, in short term this effectively helped the world from drowning.

Now, as every economic and non economic activity has its own effects.

This additional currency will lead to chasing of a few goods by more money i.e. in simple words inflation.

Things will come to stand still, real worth of money will be lost, there might even be situations of anarchy in many states. Leading to Investments loosing its worth, supply seems to decrease further. Jobs will also go out of hands. hence Demand will decrease, leading to another trap in vicious circle.

Thats what I am looking in near future. Ans I am sure this is onlly lined up. As per me this inflation will be lead by auto sector and related sector (like oil and gas).

The increase in prices is due to increase in income levels and simultaneously output of any sector haven't increased. If any sector could have grown at the same pace or even higher (leaving other sectors unattended) then there should have been a sector in the economy who must not b visiting inflation and in 2nd case could have been witnessing deflation.

So it is very clear from the above discussion that this increase in income is due to excess money printing leading to fall in its value.

Given the rising inflation equilibrium is far from here due to fall in supply increase in demand and change in other economic and non economic factors like poor administration, increasing HOT money, decreasing level of self sufficiency, increase in imports, Govt policies among many others.

Market knows how to attain the equilibrium leaving everything behind!

Get Set!!