Inflation
Report by Joshua and Amiteez
Introduction
Inflation is a problem that has plagued humanity for hundreds of years with the first inflation being recorded around 630 BC . And for inflation today there are many things driving it but not limited to rising wages, printing money, war, lack of resources and many more. In this inquiry we are going to break down inflation and try to find a solution to mitigate the effects of inflation.
What is Inflation?
Inflation is the rise of interest rates and prices that can occur in a short span of time. There are many ways Inflation can happen. These include, Post war damages, lack of vital resources and a weak economy. It has no boundaries as inflation can reach as high as quadrillions. It isn’t too easy to prevent or stop it unless you know the steps to lower inflation.
How does Inflation occur?
Inflation occurs when prices rise across an economy. Like for example after a war a nation's supplies may be depleted but demand for them may be high because many thousands of soldiers may be fighting which means they can't work in farms or factories and many of the thousands of soldiers may have died which means they can't pour out supplies and goods which in return would mean prices for goods from factories and farms may skyrocket leading to inflation.
One iconic example is Venezuela. In recent years, the inflation rate in Venezuela rose dramatically due to money printing which is the worst thing countries would do and deficit spending. The inflation rate went so high that 1 dollar, (0.21 nzd) turned into 500 Million and recently, over a billion. Even today, Venezuela still has awful inflation and might reach higher in the future due to its poor government and leadership.
The worst recorded inflation in history was in Hungary. They decided to print money to pay for rebuilding their cities which were destroyed during
World War 2. As a result, the inflation spiked out of control in a span of a few months which broke their currency and caused mass poverty. An event like this is what is called hyperinflation which only happens rarely.
What is driving inflation currently?
From our expert mr orchard my form teacher we have that one main thing driving inflation. Is the price of oil because one main source of trade is oil which costs a lot to buy and is expensive for production costs. Nowadays, oil is becoming increasingly harder to get due to the current Russian invasion of Ukraine. Russia has many of the oil fields left in the world and due to the war, Russia isn’t letting other countries trade for oil. This has since led to production prices rising from the lack of vital resources which included oil. The rise has made interest rates and general food and goods prices go up dramatically around the world.
Labour markets have become tight due to not many people having the skills for jobs which also puts more wages on companies. New Zealand has since restricted migrant work which doesn’t help this at all.
How do interest rates cause inflation?
Lowering interest makes borrowing money cheaper and the reason this may cause inflation is it basically encourages people and businesses to spend more. This would cause inflation because if lots of people buy a certain thing such as a house or food, demand will go up for it and so will the price.
How do governments control inflation?
Some governments solve this while others make it worse. Many of them would print money to “solve” their economic problems but would make the money worthless and make inflation rise a lot. Hungary reached the highest recorded inflation rate due to printing money. As for the other countries that do solve inflation, some would make a policy that would lower prices and increase interest rates that slows inflation. Others would take specific measures like restraining the demand and adjusting interest rates.
How can we control inflation?
As inflation can be caused by tight wages on companies. If we allow migrants to come to New Zealand or other countries, then there will be enough people skilled for other jobs and wages will be balanced and inflation can slow down or decrease. Most inflation is usually meant to be solved by the government but more people in the work force and balanced spending from people can slow inflation by a great amount just as long as the government is not incompetent with it’s choices.
PMI:
In this chart here we have got 3 possible solutions to inflation . and they are Interest rates encourage migrants to come to New Zealand and reduce taxes on petrol. And we then put them into a chart from 1 to 5, 5 the worst and 1 the best and we have determined that migrants are the best solution to help us fight against inflation. Migrants are easy to bring into a country and have a pretty good chance at success. But they may not be able to prevent inflation in the future.
And too many of them can cause overpopulation.
Thesis:
To answer our Fertile Question, The way we can minimise the effects of Inflation is to balance interest rates and promote jobs for migrants to come. Wages and other price rates can lower if there are more people skilled for a certain job. Production costs should be lowered and food and other goods should be balanced with prices.
Conclusion:
In conclusion, inflation is a serious problem that can affect everyone and should be slowed down to not cause a situation much like with other countries that broke their own currency. We may not be able to fully eliminate inflation but there are still ways to help in the effort.
Bibliography:
What is inflation?
How does inflation occur?
What is driving inflation currently?
Mr Orchard (expert)
How do interest rates cause inflation?
How do governments control inflation?
How can we control inflation?