Inflation can be a good thing, let me explain

Business Unusual

Inflation occurs if you make more money available but keep the supply of goods the same or if the money supply is stable but there is a drop in supply and it can also occur when the money supply and the supply of goods are the same but faith in the currency is reduced through increased debt and poor exchange rate or political instability.

Right now we have all three in place in various economies. The US has increased money supply dramatically, almost half of all the money that has ever existed in the US economy was added in the last two years. South Africa has also drastically increased how much money is available in the economy. We also had lots of supply shortages which add to the problem including a reduction in oil supply pushing petrol prices higher. For countries like Venezuela and Turkey the political situation has added to the woes.

Deflation is effectively the opposite and although it is the consequence of negative inflation, it is bad as you compromise growth.

You would rather use disinflation which is a reduction in the rate of inflationary increase. So if consumer price inflation were to drop from 5,9% to 4% that would not be deflation but disinflation

If the inflation rate is negative or too low at under 2% you might use reflation to get it back to desired levels.

Stagflation is not steady inflation, it is the worst case combination of inflation, high unemployment and low growth, so South Africa is most likely in stagflation.

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