Modern inflation: essence, causes, forms of manifestation and their types in the Russian Federation

The term "inflation" means inflation. Indeed, the financing of public expenditures (for example, during periods of extreme economic development during wars, revolutions) with the help of paper-money emission with the cessation of the exchange of banknotes led to a "bloat" of money circulation and depreciation of paper money.

Inflation was characteristic of monetary circulation: in Russia - from 1769 to 1895 (with the exception of the period 1843-1853); United States - during the War of Independence 1775-17783. and the civil war of 1861-1865; England - during the war with Napoleon in the early 19th century; France - during the French Revolution of 1789-1791. Inflation reached especially high rates in Germany after the First World War, when in the autumn of 1923 the money supply in circulation reached 496 quintillion marks, and the monetary unit depreciated a trillion times.

The given historical examples prove that inflation is not a product of the present, but took place in the past.

Modern inflation has a number of distinctive features: if earlier inflation was of a local nature, now it is ubiquitous, all-encompassing; if earlier it covered a longer and shorter period, that is, it had a periodic character, now it is chronic; modern inflation is influenced not only by monetary, but also by non-monetary factors.

Consequently, modern inflation is influenced by many factors.

The first group includes factors that cause an excess of money demand over commodity supply, as a result of which there is a violation of the requirements of the law of monetary circulation. The second group combines factors that lead to an initial increase in costs and prices of goods, supported by the subsequent pulling of the money supply to their increased level. In reality, both groups of factors are intertwined and interact with each other, causing a rise in prices for goods and services, or inflation.

Depending on the predominance of factors of one group or another, two types of inflation are distinguished: demand-pull inflation and cost-push inflation.

Demand inflation caused by the following monetary factors.

The militarization of the economy and the growth of military spending. Military equipment is becoming less and less suitable for use in civilian industries, as a result of which the money equivalent that opposes military equipment turns into a factor that is superfluous for circulation.

The state budget deficit and the growth of domestic debt. For example, the real deficit of the state budget of the Russian Federation in 1992 amounted to 11% of GDP, and in 1994 it should not exceed 9,4% of GDP (or 70 trillion rubles). The deficit is covered by placing government loans on the money market or with the help of additional issue of fiat banknotes of the central bank. The first path is typical for the United States, and the second for Russia, however, since May 1993, the state budget deficit of the Russian Federation began to be covered by allowing government short-term obligations (GKOs) on the market: by mid-1994, they were issued in the amount of 3 billion . rub.

Credit expansion of banks. Thus, as of June 1, 1994, the volume of loans granted by the Bank of Russia to the government amounted to 27 billion rubles, or 655% of its consolidated balance sheet.

imported inflation. This is the issue of the national currency in excess of the needs of trade when buying foreign currency by countries with an active balance of payments.

Overinvestment in heavy industry. At the same time, elements of productive capital are constantly withdrawn from the market, in exchange for which an additional monetary equivalent enters the circulation.

cost inflation characterized by the impact of the following monetary factors on pricing processes.

Price leadership. It was observed from the mid-60s to 1973, when large companies in industries, when forming and changing prices, were guided by prices set by leading companies, i.e., the largest producers in the industry or within the local-territorial market.

Decreased growth in labor productivity and falling production. This phenomenon occurred in the second half of the 70s. For example, if in the US economy the average annual rate of labor productivity in 1961-1973. was 2,3%, then in 1974-1980. - 0,2%, and in industry, respectively, 3,5 and 0,1%. Similar processes were typical for other industrialized countries. A decisive role in slowing down the growth of labor productivity was played by the deterioration in the general conditions of reproduction caused by both cyclical and structural crises.

The growing importance of the service sector. It is characterized, on the one hand, by a slower growth in labor productivity compared to the branches of material production, and on the other hand, by a large share of wages in total production costs, a sharp increase in demand for services in the second half of the 60s and early 70s. In the 1,5s, it was stimulated by a noticeable rise in prices: in industrialized countries, the rise in prices for services was 2–XNUMX times higher than the rise in prices for other goods.

Accelerated growth of costs and especially wages per unit of output. The economic strength of the working class, the activity of trade union organizations do not allow large companies to reduce wage growth to the level of slow growth in labor productivity. At the same time, as a result of the monopolistic practice of pricing, large companies were compensated for their losses due to accelerated price growth, i.e., a wage-price spiral was launched.

Energy crisis. In the 70s, it caused a huge increase in the price of oil and other energy resources. As a result, if in the 60s the average annual growth in world prices for the products of industrialized countries was only 1,5%, then in the 70s it was more than 12%.

In international practice, depending on the magnitude of price increases, inflation is divided into three types:

▪ creeping - if the average annual rate of price growth is not higher than 5-10%;

▪ galloping - with an average annual rate of price growth from 10 to 50% (sometimes up to 100%)

▪ hyperinflation - when price growth exceeds 100% per year (the IMF currently defines hyperinflation as a 50% increase in prices per month)

Author: Shevchuk D.A.

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