Inflation Control and De-control
To measure the control of inflation, the consumption patterns of any country or province needs to be marked. Inflation in raw terms means a state when the liquidity is in excess of goods meant to be purchased for basic necessary items- meaning, any price rise is dictated by excess money circulating in the market, leading to a sudden price rise. This calls for corrective actions to measure and control inflation.
A few concepts have been used by the central bank of any country to control inflation. The basic idea is to invest the excess liquidity and capture the rise of price. Disposable income can also lead to excess liquidity in the system. A self-circulating economy is much more provincial than the free economy.
A self circulating economy is a mixed economy where the disposable income is consumed in further reinvestments. The excess liquidity gets absorbed. To control inflation, the basic items need to be capped during stocking and wholesale sales, as they control the larger part of the inflation measures. Necessary items need to be marked that can be used for measuring inflation.
Some old school of thoughts concerns that inflation can be measured by SLR and CRR capping. However, with evolving time, stocking limits to basic goods and items used for daily consumption can be entertained. Excess liquidity in areas with high consumption patterns and excess liquidity can put a price cap to household items.
Investments in consumer goods, manufacturing and daily household items can reduce inflation in the long run. Low-end manufacturing units can be used to drive consumption and spiral down prices. To curb inflation, long term monetary policy can be a forerunner to inflation. Currency depreciation can also be an arresting factor for excess liquidity. Money velocity through technology can also drive down prices.
Sometimes, we need to allow a slight appreciation in prices by curbing inflation around 2-3 percentage points. A lesser point of inflection can cause severe damage to growth, including a stability of prices. A slight inflation is always desirable for growth.