1.3 Finance as a factor in inflation

Clarification of the relationship between finance and inflation seems appropriate to start with the causes of inflation. There are two main types of inflation - sprosnuyu ( sverhsprosnuyu ) and costly . Questionnaire inflation generated by demand exceeding supply, and costly is the result of increased production costs.

If we consider inflation as an economic process , we can distinguish two mechanisms under which it develops : market pricing and centralized pricing. Based on this, whether true assumption that the market economy is accompanied sverhsprosnaya inflation because here the proposal dominates the demand and the economy , characterized by centrally deployed prices - costly . In a market economy the price mechanism does not work automatically , if demand exceeds supply , prices rise . But even in market conditions conventionally costly inflation acts as sprosnoy , because the manufacturer can realize increased material costs only if the demand , otherwise they will not cause a rise in prices and reduce profits , which in turn leads to a partial reduction in the production . Curtailment of production will occur as long as there was a demand for providing higher prices and profit even with the increased cost of production . Thus, the balance of supply and demand is achieved by increasing the price by increasing demand and a decrease in sverhpredlozhenii .

In the economic system with centralized pricing this mechanism fails . Increased demand is not accompanied by a rise in prices , but inevitably leads to higher costs . The manufacturer does not see the need to counter rising costs as little interested in making a profit , and , moreover, increased costs without problems can be shifted through the prices for the consumer.

These arguments make it easier to understand the relationship between inflation and financial , since the latter , as shown in the second chapter , are in close connection with the implementation of the price distribution processes . When that value categories are expressed in money, nevertheless fully with them, they do not merge . Finance as part of the monetary relations suffer the consequences of monetary and "disease" , and inflation has ailment inherent money and money circulation .

Finance, as well as money , participate in the " service " of the process of social reproduction : production, exchange , distribution, consumption. Basically finance present distribution step . What else distinguishes finance and financial relations of money , is the fact that there is no financial relationship counter movement of wealth , ie money circulation occurs without a corresponding commodity equivalent .

But it would be wrong to try to find the relationship between money and finances , while forgetting their dependence on the economy. Instability of modern economies , caused by cyclical reproduction process , affects their financial and monetary systems . In finance, it is expressed in chronic budget deficits , public debt , and in the area of money - inflation turned into a permanent , intractable disease , recipes complete cure from which neither theory nor practice is not found .

Depreciation of money , reducing their purchasing power , as it may seem paradoxical at first glance , due to the activities of the state . Although never no government set themselves the goal rather the opposite - suppression always proclaimed one of the main goals of the state .

Why under socialism was not inflation , or rather, it was , however, lo impact on the economy and the population was small , in any case, much less than in Western countries, Third World nations ? The answer to this question , first, lies in the fact that the socialist countries have tried to live within our means . Secondly, they are practically absent from the financial market . The latter, as is known, includes not only cash but also stock (securities) market. All these quasi- money lead to excessive increase of financial capital , the market value is significantly higher than the volume real capital . Moreover, as international experience shows that this gap tends to increase as the market ejected huge masses of corporate and government securities. The inevitable consequence of this is the growth of the money supply , not the provision of goods . As a result of the monetary system increasingly divorced from the needs of production and credit money issued by the banking system , depreciate.

Financial impact on inflation in two ways. On the one hand , they stimulate inflation, and on the other - are so powerful lever in the hands of the government , with which it is possible , if not completely suppress inflation , then at least significantly reduce its negative effects.