AboutWarren D. Miller, CFA, ASA, CPA Expertise My in-depth knowledge of economics is confined to three sub-disciplines: Austrian economics, industrial organization, and evolutionary economics. Other questions dealing with macroeconomics, the traditional neoclassical paradigm, labor economics, environmental economics, agricultural economics, health economics, and so on should go to those who have the appropriate expertise.
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Experience I work with Austrian economics (which is different in major respects from the traditional neoclassical model), industrial organization (which is about industry structure, conduct, and performance), and evolutionary economics (almost, but not quite, the economic analog of its biological counterpart) everyday in my work. I appraise closely-held businesses, provide exit-planning services, and offer high-level strategic analysis, advice, and clients to CEOs and owners of mid-sized businesses. Understanding, applying, and writing about these disciplines is an essential part of how I have made my living since 1993.
Organizations CFA Institute, Strategic Management Society, American Society of Appraisers, Institute of Management Accountants, Academy of Management, Culver Legion
Publications CFA Magazine, Strategic Finance, Valuation Strategies, Value Examiner, Journal of Advanced Property Economics, Harvard Business Review, American Fly Fisher, CFA Digest, CPA Expert, and Business Valuation Review, among others
Education/Credentials MBA - Oklahoma State (1991)
BBA - U. of Oklahoma (1975)
Chartered Financial Analyst designation (2006)
Accredited Senior Appraiser (2006)
Certified Management Accountant (1992)
Certified Public Accountant (1992)
I live in Malaysia and have just retired from my job as a disrtict postmaster.Recent months have seen gas prices rised by 45% and food,comodity prices have also gone up.
Looking back to my days in school,I only use 20 cents a day,and that is more than adequate.My children now need $10 a day.My question is,prices have gone up as long as I can remember..will it continue to go up?Will my grandchildren need $50 a day.Will we then need to carry large amounts of money in our pockets?Our neighbour county,Indonesia..their transactions are typically 100,000.00 Rupiahs.The denominations are so large,why can't the Indonesian govt.just remove three zeros from their Rupiah?
Thanks.
Answer Hi, Yee--
Am glad to try to shed some light on this for you. Thank you for using AllExperts.com.
First, let's understand how inflation, which is defined as a broad increase in prices, occurs: it happens when a government increasing the money supply by "printing" (creating through its central bank) money at a faster rate than the overall supply of goods and services in an economy have increased. That results in relatively more money chasing relatively fewer goods and services. In this case, demand (as measured by the money supply) exceeds supply (of goods and services), so there is a general increase in prices.
The people that really get hurt by inflation are (a) holders of debt that has a fixed interest rate; (b) those living on fixed incomes; and (c) the poor. So why would a central bank increase the money supply too fast?
Well, one reason is that they overestimated the growth of goods and services. This happens sometimes. When it does, savvy central bankers are usually quick to recognize their error and so they either reduce the money supply or grow it at a slow enough rate for the supply of goods and services to catch up. As they do, prices should fall, at least in theory.
There's another reason central bankers choose to inflate: they want to reduce interest rates. Why would they want to do that? Well, there might be an election, and the incumbent politicians want the economy to appear to be better than it actually is.
But there's a third reason, one that is especially common in emerging economies, though it happens is developed economies sometimes, too: the government can't pay its bills. So the central bank creases money, the government writes checks, and the people get shafted because prices rise without much, if any, increase in wages and salaries.
I don't know what the cause of inflation in Malaysia is because I'm not a student of Malaysian economics. But, having spent several days near Kota Kinabalu in your beautiful country during March 2001, I would bet that reason #3 is the primary culprit.
As for your idea of "just removing three zeroes from the rupiah," well, if prices didn't fall by three zeroes, too, then the government would have to print even MORE money, wouldn't it? Otherwise, people couldn't buy anything. So, while deleting three zeroes sounds good, it is quite unworkable.
I hope this helps, Yee. Please help me by providing feedback via the 'Rate the Expert' email you'll receive right after you get this. That helps me help folks like you even better in the future.
