This is what we found interesting from the current issue of the “The Economist” (April 07th – 13th April 2012).
In the section ‘Leaders’ of this issue titled ‘The perils of panflation’, there is a warning about inflation. In my experience with inflation I ask if it is possible for humanity to survive this. Inflation may become a major instrument responsible for the extinction of humanity. The economists and central bankers give a monthly report of inflation and also discuss it on an annual basis. They direct the economy based on this data. When inflation slows down they use their monetary power to enhance economic growth through pumping extra credit, and by lowering the interest rates to encourage consumption. Their benchmark for success is incremental GDP and asset value growth. Nowhere has a study been conducted to examine at the journey of inflation over the years and its future consequences. In this note, we look at inflation as we have experienced it. Sixty years a short tram ride cost 3 paise from Bolton market to Garden West in Karachi. Today, in Bombay, a similar distance by bus will cost Rs.15/. What one spent on a school education was Rs.15 per year. Today, a quality education will cost not less than Rs.30, 000 per year. This is true about the cost of living as well. Can inflation continue its trajectory without an adverse impact on the existence of humanity?
This question has to be examined from the following facts:
- Today the world population is about 7.5 billion. It was 3 billion 60 years ago and soon will grow to 9 billion in the next few decades. The mania for growth, greed and easy money has raised the expectation of the people today. Their role models are the elite. The earth does not have the resources to fulfill these needs. The real resources are limited unlike the abundantly available and cheap printed money.
- Futurists believe that at the current rate of consumption human beings will need 4.5 times the real resources from the earth to feed humanity.
- More alarming is the usage of water. It’s usage and waste has compounded at an alarming rate. The food we will consume in the next forty years is equivalent to what we have consumed in the last 1000 years.
- Additionally, e-waste that is being unloaded on the globe is about 60 million tons a year. This contaminates the climate, water, agricultural land, forests and the flora and fauna.
The section ends with Karl Otto Phol’s comparison of inflation to toothpaste. He says it is “easy to squeeze out of the tube, almost impossible to put it back in. The usual cures, monetary and fiscal tightening, will not work for panflation. Women will never squeeze back into their old clothes unless they reject the size inflation. Instead it is time for everybody to tighten their belts (literally) and fight all sorts of inflationary flack.”
‘Older and wiser?’ (75)
Today we are willing to give up wisdom for short- term greed. A good example of this difference is cited below:
- “A debate between residents of an impoverished pacific island over whether to allow foreign oil companies to operate there following discovery of petroleum, (those in favour viewed it as an opportunity to get rich; those against feared the disruption of ancient ways and potential ecological damage)”.
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