Inflation Drums Continue

[Donald ("Skip") Conover]

"Inflation Reflects Oil Prices Demand: RBI" When will The Economic Times get it right? "Inflation reflects money supply, and nothing else! Increases in oil prices are simply a measure, one of many, which suggests what is happening to money supply. Those central bankers don't want the people to understand what is really going on here! Who picks those central bankers, anyway?

"Inflationary Pressures to Continue: RBI" They are preparing Indians for the fact that for political reasons, the RBI is going to let inflation drift, causing untold costs to the purchasing power of all Indians. It could be thought of as a back door election tax! At 12%, the cost to Indian purchasing power parity is approximately US$480 Billion. What is worth that cost?

"RBI May Squeeze Money Supply" The amount suggested won't be enough, but it is a start.

[Donald ("Skip") Conover]

Business Week and The Economic Times report that India's inflation reached 12.1% during the week of July 26th. In the article, many Indians keep doubting whether interest rate increases and bank reserve requirements can stop inflation. At the moment, they are the only things tht has a chance; though the RBI will need to be much more aggressive for this to have the necessary affect on inflation. I don't favor the reserve requirements, because those stop small businesses from succeeding--usually only big companies have the depth to withstand the consequences. But, I have to admit that anything that slows down the economy may, in fact, also slow down inflation.

As long as the Government of India keeps "printing moey" to subsidize oil prices, inflation will be a problem for everyone! Of course, with an election season just about on for India, this policy is not going to change any time soon. Indian politicians seem to believe that populist campaigns are the only campaigns that work at election time--in a poorly educated population, they may be right. But, with more college educated people than live in the USA, why do they get away with this back door tax on everyone?

As long as prime interest rates are below inflation, there is not enough discipline in the market to slow inflation. It's a bitter pill, but it will be a lot worse when India has to take twice as much medicine to cure the disease!

[Donald ("Skip") Conover]

The Economic Times reported that Indian inflation is at 12.44% this week. Meanwhile, Prime Minister Singh should be ashamed of himself for suggesting that this inflation is because of external factors, and not the profligate policies of his government. I just read that the government has increased government salaries by 21%, backdated to January 1, 2006....

[Donald ("Skip") Conover]

Inflation was up to 12.63% for the week ended August 9, 2008. The Finance Minister is still blaming it on the wrong causes--a friend says this is a standard Indian election ploy. I have no doubt! Otherwise, we would have to question whether the Finance Minister was paying attention during his studies.

This article claims that inflation will only subside after October. Good luck!~ There is nothing suggesting this could be the case, except the strengthening of the dollar, which may help over time. But, why October?

[Donald ("Skip") Conover]

"The way to crush the bourgeoisie is to grind them between the millstones
of taxation and inflation". ~ Vladimir Ilvich Lenin