Thursday, September 16, 2004
Can we keep a lid on inflation?
New Zealand seems to be doing a pretty good job of keeping inflation under control at the moment (although home owners might argue that mortgage rates in the 9% range hardly seems like low inflation. Ah, but you see, the Reserve Bank does not take mortgage rates into account when it compiles inflation figures. The fact that you're paying more is only imaginary!)
Can we keep it up in the long term? Gareth Morgan says the long-term international forces are actually well beyond our ability to control.
"In his excellent 1996 tome, “The Great Wave – Price Revolutions and the Rhythm of History�, David Hackett Fisher provides an appraisal of 800 years of price cycles which readily shows the folly of getting comfortable with any one rate of price inflation, or any one prescription of how to control general price levels. Such a salutary lesson seems timely when we’re seeing reasonable price stability but only as the direct result of opposite forces that happen to be equal for now – globalisation and IT-sourced productivity on the one hand, versus monetary expansion and an explosion of debt on the other."
This is a very good article on understanding the underlying forces.
New Zealand seems to be doing a pretty good job of keeping inflation under control at the moment (although home owners might argue that mortgage rates in the 9% range hardly seems like low inflation. Ah, but you see, the Reserve Bank does not take mortgage rates into account when it compiles inflation figures. The fact that you're paying more is only imaginary!)
Can we keep it up in the long term? Gareth Morgan says the long-term international forces are actually well beyond our ability to control.
"In his excellent 1996 tome, “The Great Wave – Price Revolutions and the Rhythm of History�, David Hackett Fisher provides an appraisal of 800 years of price cycles which readily shows the folly of getting comfortable with any one rate of price inflation, or any one prescription of how to control general price levels. Such a salutary lesson seems timely when we’re seeing reasonable price stability but only as the direct result of opposite forces that happen to be equal for now – globalisation and IT-sourced productivity on the one hand, versus monetary expansion and an explosion of debt on the other."
This is a very good article on understanding the underlying forces.
