Inflation could remain high for long period and 3 things would need to happen for Deflation to happen

Personally, I think inflation could remain high in Singapore for a long while and don't think deflation will happen.

For deflation to happen, which is consumer and asset prices decreasing over time, and purchasing power increasing, I feel the below three things need to happen.

Firstly demand for the goods must decrease so that prices may drop down to cope with lower demand. With lower demand and supply being the same, prices would drop. Similar to how durian prices would be low in high supply and prices become high in low supply season.

Next would be an improvement in transportation. Transportation plays a huge factor in how goods are priced. If transportation costs go up due to oil prices going up, everything that is being imported would be charged at higher prices. With goods being transported at lower costs due to lower oil prices or transported more efficiently, goods can be sold at lower prices.

Lastly expectations of future inflation rates. If the majority expect the price of goods to go up in the future. more people would buy now which drives up demand. And it results in a self-driven prophesy as the prices do go up eventually due to higher demand initially. On the other hand, if people expect the prices of goods to come down, they would delay their purchase and due to lower demand, prices of goods do come down.

What are your thoughts about inflation and since inflation is a man-made event, what can be done about it?

https://www.rba.gov.au/education/resources/expl...

demand-pull,
cost-push, and
inflation expectations.

Discussion (4)

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Eiscue

04 Mar 2023

Thanks for the information!

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1M45

Edited 19 Feb 2023

The government can only increase interest rate to curb inflation.
When interest rate increase, the cost of buisness increase,
When cost of buisness increase, buisness will pass the cost to consumers.
When price increase, consumers not enough $$$. The demand of goods will reduce.
Once demand is curb the pricing will stabilise
However, based on experience, once the price increased, it will never come down, it will only maintain.

To us inflation is a bad thing, however to a economy a controlled inflation is a good things
Because people will want to earn more money when money not enough.
In order to earn more money, people have to be more productive, GDP will then increase. That is why the govt always promote upskilling.
When people earn more money , the govt can tax us more. Nation will also become richer.

As an individual, dont depend too much on govt, every subsidies they provide they will increase something else to compensate, there is no free money. Net-Net will not have much different.
To really combat inflation there are only two way (1) own assets that increase in value with inflation. (2) have a buisness so we can pass the cost to other people.
Saving, budgeting and increasing income are just way to maintain a positive cashflow and cash reserve so we wont feel too stress about inflation, it wont fight inflation.

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