The most important factor is the speed of issuing new currency. The speed of issuing new currency determines the speed of price change. The overall price level of social goods is determined by the currency circulation. Almost all the rising inflation phenomena are caused by excessive currency issuance. Inflation, as the name implies, means that the currency issued has expanded, too much.
There are several main reasons for spamming money. First, the government is short of money and obtains income by issuing money. Issuing currency is the government's source of income and occupies a major position in extraordinary times. For example, during the war, the government's main income came from issuing currency. This is the cause of inflation in some developing countries.
Second, stupid foreign exchange policy. In a certain country, the central bank forces individuals and enterprises to buy foreign exchange. Resulting in a large amount of foreign exchange reserves. How much foreign exchange the central bank buys means how much local currency it issues. For example, China's central bank 1 trillion US dollars of foreign exchange reserves means that the mainland has issued more RMB with corresponding value.
Third, in order to stimulate the weak domestic market, the government appropriately issues some currencies to promote social consumption. This policy should not belong to the pattern of spamming money. This is a currency that moderately increases social circulation. From an economic point of view, it should be beneficial. It is estimated that this is the only important economic benefit of increasing currency issuance. When the market is weak, it is good to increase some currency in circulation.
When the currency circulation is fixed, increasing the social currency circulation can also be achieved by changing the bank reserve ratio. The smaller the reserve ratio, the greater the multiplier effect of banks on money, the more money that can actually circulate, and the greater the consumption of social goods. With the increase of social commodity consumption, the supply capacity of social commodities may be stretched, and prices may rise.
The decrease of bank reserve ratio is beneficial to the decrease of enterprise loan cost and the enterprise to obtain more loans. Conducive to the development of enterprises. The development of enterprises is conducive to increasing the supply of social goods and curbing the rise in prices. The decline in the reserve ratio is conducive to lowering the price level in the long run. In the short term, it has pushed up prices. The government should not curb price increases by raising the reserve ratio. In the long run, this measure will not have the effect of curbing price increases. The increase of reserve ratio will restrain the country's economic development in the short and long term.
In addition to monetary factors, there are other factors that will also affect prices.
The increase in productivity will lead to the decline in the prices of some products. For example, the price of computers has been falling steadily. The progress of productivity will lead to the increase of people's income, that is, the price of labor will gradually rise. The gradual increase in labor prices will affect the prices of many commodities. For example, the price of goods that consume a lot of labor will go up. Just like the price of a haircut, it is basically rising steadily.
Higher taxes will also lead to higher prices. How much the tax ratio increases will generally lead to how much the price will rise. Personal income tax has little effect on prices. Therefore, taxes have an important impact on prices. Various fees, such as the management fees of public utilities, have played a role in pushing up prices, just like taxes. Similarly, lowering taxes and fees is conducive to falling prices.
Foreign exchange rate policy will also affect prices. For example, underestimating the domestic currency will lead to imported goods, which are relatively expensive. Its effect is to promote the rise of commodity prices in the domestic market. For example, if the RMB appreciates 10%, the crude oil purchased by the mainland will be cheaper in RMB 10%.
Because the domestic currency is undervalued, the prices of domestic export commodities are relatively cheap, which leads to an increase in exports. Export commodities are equivalent to domestic commodity consumption. The increase of export commodities is equivalent to the increase of domestic commodity consumption. This will lead to a tight supply of domestic goods and lead to an increase in prices. For example, the mainland's reserves of 1 trillion dollars actually mean that the mainland imports and exports more goods of 1 trillion dollars. These goods are consumed by foreigners, and the supply of these goods comes from the mainland. This has increased the supply difficulties of mainland goods and pushed up prices.
Rising import prices will also lead to rising domestic prices. Because imported goods are also part of the goods consumed by domestic people. The increase in the prices of some commodities consumed by domestic people will lead to a corresponding increase in the total average prices of all commodities. For example, the increase in oil import prices will cause a series of commodity prices to rise. Will make the overall price of goods rise. The increase in the price of imported goods is called the increase in import prices or import inflation.
Monopoly supply will also lead to price increases. For example, land is monopolized by local governments, resulting in high land prices. High land prices lead to high housing prices. Local governments make profits by monopolizing land. Such gains are equivalent to an increase in taxes and fees. Monopoly acts affect prices in the same way as taxes and fees. Other monopolistic behaviors are similar to land monopoly. The strengthening of social monopoly will push up the overall price.
Foreign aid will also lead to price increases. Foreign aid funds generally come from taxes. An increase in foreign aid means an increase in taxes and rising prices.
Attracting foreign investment will curb the price increase. Attracting foreign investment is beneficial to the foreign exchange market, overvaluing the domestic currency, and overvaluing the domestic currency is beneficial to improving people's purchasing power, which is equivalent to falling prices. It is conducive to reducing exports, reducing employment, curbing the rise in labor prices, increasing domestic commodity supply, and promoting price decline. Attracting foreign investment is conducive to promoting domestic investment growth, improving domestic commodity production capacity, increasing commodity supply, promoting price decline, increasing employment and pushing up labor prices. Attracting foreign investment can affect prices in many ways, and it can also affect labor prices in several ways. Similarly, the effect of foreign investment is opposite to that of attracting foreign investment.
Credit behavior will also have an impact on prices. Credit behavior has always existed, not a sudden phenomenon. Judging from the long-term probability, the stable scale of credit behavior should have no effect on prices. However, periodic or non-periodic changes in the scale of credit behavior should have a certain impact on price changes. Credit phenomenon is equivalent to promoting social consumption, increasing social consumption and making the supply of goods tend to be tight. The increase of the scale of credit behavior will promote the price increase, while the decrease of the scale of credit behavior will inhibit the price increase.
The speed of labor supply will also have an impact on prices. The supply speed of labor force will affect the labor price. Labor price is also an integral part of price. Changes in labor prices will affect the prices of a series of commodities. Therefore, the speed of labor supply will have a certain impact on prices. The increase in the speed of labor supply will curb the overall price increase. The decrease in the speed of labor supply will push up the overall price. The speed of labor supply in the mainland may have begun to decline gradually, and the trend of rising prices in the mainland should increase. The speed of labor supply is determined by the population structure. Due to the family planning policy, the population structure in the mainland is shrinking, and the speed of labor supply decline will be faster and faster, which will have a greater impact on prices.
The speed of money circulation has an important influence on the price. For a country, the speed of currency circulation is generally stable. For different countries, the speed of money circulation is different. For the same country, the speed of currency circulation in different periods is different. The speed of currency circulation is related to some talents and cultural customs of the people. It is also related to the country's economic operation situation. It also has a certain relationship with the social system of the country. For a country, the speed of currency circulation will accelerate the price increase. A decrease in the speed of money circulation will lead to a decrease in prices. The changing direction of money circulation speed is consistent with the changing direction of prices.
The influence of capital investment factors on prices. Capital investment also belongs to consumption, which is different from ordinary consumption. Capital investment can generally improve the efficiency of social operation. Improving social production capacity means improving commodity supply capacity. The improvement of commodity supply capacity is conducive to increasing the degree of competition in commodity supply and promoting price decline. Transforming ordinary consumption behavior into investment behavior does not affect total consumption, but it can promote social production capacity and improve social operation efficiency, both of which can reduce the price level. It can be seen that capital investment will generally bring about a moderate decline in prices.
There should be many factors leading to price changes. The most important factor is currency circulation.
For the mainland now, the main reason for the price increase is the large currency circulation. The relatively large currency issuance is estimated to be mainly caused by the foreign exchange reserve policy. The undervaluation of RMB in the foreign exchange market is also an important reason for the price increase in Chinese mainland. The strengthening of various monopolistic behaviors has also promoted the price increase in the mainland. The rise in labor prices is also one of the factors that push up prices in the mainland. Scientific and technological progress has effectively curbed the rise in prices in the mainland.