@izzythepush,
Hmmm...obviously I didn't real all his posts properly. I just found another gem of ignorance :
Quote:You are bullshitting. The local government should welcome inflation! The more inflation, the better. Why? because it means two things:
1. some people are benefiting from the mining company.
2. Those same people are spending their money in the local economy.
Because of 2, more businesses will be opened, and creating even more economy activities. More money for the average people etc. I love capitalism.
Seriously?
Well, there are plenty of examples where you are wrong - lets go The western world, Australia, and Zimbabwe.
The western world :
- They all use Interest Rates to control inflation, because they all see inflation as bad.
- They float their currency to help control inflation, because they all see inflation as bad.
Please read up on how these work if you don't understand them. And if you don't understand the reasons all western govt's fear inflation - do some research.
Australia :
Australia's example correlates to your example precisely because you mentioned mines & inflation. Australia, per capita, has huge resources. During the minerals boom (after about the mid 90's til current period) where the price of minerals just kept rising and rising...and most especially leading up to the GFC in 2008, Australia faced a problem :
- the minerals boom was creating HUGE wealth in the minerals sector, even while the economy was only growing at 2-3 percent or so.
(if the idiot economist knew their job, they should have known this meant the rest of the economy was barely growing, or was perhaps even shrinking)
- the huge wealth of the minerals industry, created a need for more domestic jobs, which drove up the wages of people in industries with translatable skills, which drove up the prices of those things that they created or serviced. The money these workers earned allowed them to invest, which drove up the price of real estate etc....ie. the Mining boom was driving inflation. The mining sector in Australia, in terms of the overall population of Australia, employs only a small % of Australians.
- the Reserve Bank of Australia, seeing the mining sector booming and inflation indicators rising, started slowly (yet consistently and continually) increasing the Official Interest Rate.
- Due in large part to the rising interest rates, more and more people started defaulting on their mortgages (if you don't understand why a continuing acceleration of this is bad - read into the real estate effects of the American GFC, and it's corresponding effect on construction businesses. And if you don't understand why construction bussinesses are essential to the economy, I'm not sure what you are doing writing about this stuff), and the % of small businesses folding started to increase.
- eventually the rest of the economy got bad enough that the RBA had to admit 'we had our eyes on the wrong indicators', and they started slashing Official Interest Rates quickly. They then coined the term 'two speed economy' to describe to themselves what was happening.
- The GFC then hit (but that's another story).
The problem here was that the Govt's measures to control inflation were a blind reaction to the overall statistic of inflation...a reaction that many of us (yes, me included) were saying 'what are those idiots doing - if they keep raising rates, they are going to stuff the economy by causing non mining businesses to collapse & the housing sector to implode (deflation of house values, and collapse of construction businesses).
Zimbabwe :
An extreme example, but paints a picture nicely. Read for yourself their problems with inflation. It's everywhere.