Saturday, February 02, 2008

Street Protests Wont Lower Inflation but changes in monetary and fiscal policies will.

What is inflation? In economic terms, it is defined by rising prices of goods and services. It means money is losing value. I found this definition on RBNZ website.

In Malaysia, the problem is not just imported inflation (higher oil prices) but largely structural, but high oil prices has been a convenient scapegoat for a Govt at lost to explain and come up with viable solution. When the Govt done nothing, except blaming the high prices of oil in the international market.

The people are tired of the same excuses, so they protest and demontrate, as reported in Malaysiakini. Arresting the protesters and media blackout wont solve the problem, but changing monetary and fiscal policies will.

I am not saying there is no point in demonstrating against price hikes and get arrested. Actually they have done a very good job in highlighting inflation issues, price hikes and inequity in our society.
And, by being arrested for demonstrating on price hikes and inflation issues, they have showed that our Govt have no contingency plan to alleviate the effect of inflation suffered by the masses.

Inflation is a macroeconomic problem. Its one of the effect of runaway growth, and it could be the effect of external shock. In our case, or the case of world economy in general, the effect of price hikes of scarce commodities, ie oil, coal and other resources like iron and other metals.

will continue later.

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