huge inflation without wage increases in vietnam - How?

Discussion in 'Economics' started by elitist-trader, Jul 16, 2011.

  1. Reading this Bloomberg article got me thinking, in Vietnam, if wages are staying the same for the majority of people, how does inflation hit 19.8%? Is it just a currency issue? or is there one really rich dude driving around to every shop paying crazy prices for food?

    "Inflation quickened to a 29-month high of 19.8 percent in May, a level the World Bank called “intolerable” in a report this month."

    “The price of everything -- food, gas, electricity -- has gone up by more than my pay rise,” said Kien, 24, whose monthly salary is equivalent to $87. “I can’t even afford to start a family. I wouldn’t have enough to buy milk for my baby.”
  2. Eight


    They might be tapping their savings accounts...
  3. When costs accelerate that fast. Many resort to planting their own seeds, and farming their own food. Rapid debasement of currency supply caused by excessive lending, and little oversight. Increases the total amount of dollars chasing a limited number of goods. The best way to solve a problem like that. Is by increasing the production of food. However Vietnam is right next to China. So, you would need to increase production so prices fall not for Vietnam, but would also include China. Remember a Vietnamese farmer would be happy to sell to a Chinese grocery chain at a higher price. So it's imperative that supply increases, so that the orient can experience lower prices on food.

    That's the one advantage of being an American. Our country has the most advanced machinery, fertilizers, and perhaps the best soil, and weather conditions in the world. Allowing us to produce a super surplus of food. Making the USA a net-exporter of food. It's another reason why the USA has secured it's dominance. All it would take, for Chinese food prices to sky rocket. IS an end of US agriculture exports to China. Therefore China keeps lending us money, for many reasons that you, and I may not think about.

    The world is fought with the political sword, and the power of the pen. No need to use guns, when you can starve a nation, or make a nation go bankrupt.
  4. nicbizz


    The one, single, gigantic advantage America has is that its currency is the de facto reserve currency of the world.
  5. My guess is jobs and work are disappearing from VietNam and moving across the border to China. The Vietnamese government is attempting to create jobs by creating and spending money. The increase in the amount of money exchanging for about the same amount of goods and services is inflationary.
  6. rew


    It's a popular myth that you can't have inflation without wage increases. Wages are just one component of costs. If the other costs go up inflation goes up. I suspect that wage increases strongly trailed, rather than led, inflation in Zimbabwe.
  7. jem


    there was a great discussion on et about the multiplier effect and deflation vs inflation.

    the purposefully debasing of the dollar via govt overspending and quantitative easing is causing inflation in food oil and commodities because of their exposure to world prices.

    Wages and real estate may not really go up until we get to hyper inflation... which some claim is inevitable and the goal of many of our institutions.
  8. Too much loose verbiage. Not a complaint, it's the nature of chat forums.

    Without increasing debt loads or increasing incomes, total spending cannot go up. It's not because those are inputs to cost, it's because if there are only X dollars to spend, then there are only X dollars to spend.

    This doesn't mean some items can't get more expensive. It just means less of other "stuff" is going to get bought. So the way non-inflation generally gets reflected in those situations is by a reduction of choice in "stuff" to buy.
  9. Yep. It's kind of like stagflation. That was supposed to be impossible according the least before it happened in the 70s.
  10. jem


    if individual wages are not increasing and individual debt load is not increasing you can still see govt spending go up.

    either by printing if the govt controls the presses or by "quantitative easing if the privately owned central back buys govt bonds.

    The increasing money supply would mean in your own market more currency is chasing the same goods... inflation

    or if the money is spent over seas ... by currency devaluations as it will take more of it to buy oil.

    Inflation is a huge tax on the people of a nation. its robs them of their savings. It robs them of the time they spent acquiring money.
    #10     Jul 18, 2011