Tuesday, 16 June 2009
How Does The Government Fight Deflation? ...
Well simple...we have the following equation:
hypothesis : The Finnish government is at the head of an Alcohol cartel called ALKO - as well as a gambling cartel (which soon will include online poker)
Inflation = funtion(X + Y + Z + alcohol tax + tobacco tax + oil tax)
Since X Y Z are plummeting due to a plummeting demand, highly undebted household, there are only few variables to play with.
Since you want to massage the data in order not to anchor deflation, they should then try to keep afloat the inflationnary components.
- Oil tax was raised in early 2008 by 10%
- rent for subsidised flat was raised by 8%
- Alcohol Tax will be raised in autumn 2009 by 10%
- Tobacco Tax was raised
- Electricity price was raised (irrationally, against market logic) by Fortum, a partly owned state company.
At some point you will really wonder what the data really mean as the rules change or are artificially manipulated to show what people want to see or hear.
PS: The other way to fight deflation is to create the ground for hyperinflation - sowing the seed of the next crisis (i.e keeping the interest rates very low, increasing government deficit)- At the end, you hear about price stability but in the past 30 years we went from bubble to bubble where prices were absolutely instable...