Inflation is the price rise that causes the devaluation of a country's currency. The essential difference between inflation and general price rise: general price rise refers to the temporary, partial and reversible rise in prices of certain commodities due to the imbalance between supply and demand, which will not cause currency depreciation; Inflation is a continuous, universal and irreversible rise in the prices of major domestic commodities that can cause a country's currency to depreciate. The direct cause of inflation is that the amount of money in circulation in a country is greater than its effective economic aggregate. The direct reason why the amount of currency in circulation of a country is greater than its effective economic aggregate is that the growth rate of the issuance of basic currency of a country is higher than the growth rate of its effective economic aggregate. The reasons why the growth rate of a country's basic currency issuance is higher than the growth rate of its effective economic aggregate include monetary policy and non monetary policy. Monetary policy includes loose monetary policy, adjusting economy by means of interest rate and exchange rate; Non monetary policies include the financial system dominated by indirect investment and financing, which has caused loan inflation, excessive export surplus in international trade for a long time, excessive foreign exchange reserves, speculative monopoly, corruption and waste, increased social transaction costs, reduced the quality of economic development, unbalanced economic structure, misleading consumption expectations, etc. Therefore, inflation is not only a monetary phenomenon, but also an important reason for inflation. Whether it is monetary policy or non monetary policy, monetary phenomenon or real economy bubble, the fundamental reason for inflation is that the GDP growth mode causes too much water in GDP, the ineffective economic aggregate is too large, and the effective supply is seriously insufficient, resulting in the reduction of monetary efficiency.
(Editor in charge: Zang Mengya)
