Prices of goods and services increase at times and are referred to as inflation. There exists low inflation or moderate inflation associated with the unstable demand and supply for the goods and services provided within a region or country. On the other hand, it can be attributed to the differences in the supply of available commodities like oil and metals. Low inflation has been a problem within the United States and other developed countries for a few years (Irwin, 2017). It has affected the worldwide economy. Slow growth within the nations and borrowing from other countries has been closely associated with low inflation. This paper will focus on low-inflation as discussed in the New York Times by Irwin Neil, how it is associated with other economic concepts and its effects on the United States.
Every country anticipates for continued economic growth. Nevertheless, there are factors like low inflation which affect and drag the progress. According to Irwin (2017), the central banks of different countries projected the inflation to be at a rate of 2% but this was not the case and the rates went way over the percentage. The increase was a blow to the economy of countries because it meant that the value of currency was lower than expected. Additionally, people would not be able to afford the basic commodities thus creating a gap between the supply and demand of goods and services. Take an example of the United States, the prices on consumer goods were expected to rise by 1.4% but they shot up to 1.96% in the month of January (Irwin, 2017).
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There are also surplus goods due to the low inflation. Consumers are not able to afford the goods and services provided. Meaning, there are a lot of goods left on the market than they are bought because the production is high and the demand is low. Commodities like aluminum and steel have been produced in large quantities but their demand is very low. Availability of excess commodities within the markets raises eyebrows. An investor will not be motivated to start an enterprise in a country or nation that is experiencing an inflation crisis. If he or she takes the risk, then they will have to wait for a little longer before realizing the profits or before the economy gets back to normal (Wolfers, 2017).
There will be struggle when it comes to overcoming the low-inflation menace. There needs to be well outlines policies and interventions to help alleviate the problem. Inflation affects each and every aspect of the economy of a nation. For it to be dealt with, there needs to an agreement among the investors, that is, the different countries. They need to come up with the right policies to be implemented, what needs to be done and what needs not be done. With this agreement, it might be easier to fight the low inflation that is affecting the different developed nations (Wolfers, 2017).
Unemployment rates are also high due to low inflation. According to Irwin (2017), unemployment is closely associated to inflation because in cases of slow growth and development, more people tend to be laid off thus increasing the number of unemployed people. On the other hand, unemployment slows down the economic growth of a country thus creating a vicious cycle of low inflation or inflation in general. Unemployment, slow growth, lack of investors, surplus production and low demand are the major effects of low inflation.
The most aspect that affects the economy of the United States is the continued low inflation that is expected. The United States and the world as a whole will need to go an extra mile in ensuring they thoroughly deal with the problem. The current United States government has put in place measures and policies that might lead to higher inflation in the markets. What is expected that the increase might be gradual and not generally affect the economic growth of the country. Nevertheless, there are challenges that the country will experience and negative effects to be seen no matter the direction to be taken. Some of the negative effects might be political instability, increase in unemployment rates and rise in the average wage. Low inflation will cause a critical setback on the economy of the country. Putting in place the right policies will save the country from experiencing the crisis (Irwin, 2017).
I disagree with what Irwin (2017) has discussed in his article because low inflation might not be that bad to a country as portrayed in the writing. Low inflation has its own benefits. Firstly, the stable firms or company’s within a country get the confidence and motivation to invest more. With the investment, a country will grow or realize economic growth as the years pass by. In addition, there is economic growth because the people who are low paid like the farmers will find ways of earning more. They will tend to invest in manufacturing. With more manufacturing companies, the unemployment rates are reduced because more people are also employed. The supply will then be high and the demand high because people can afford the commodities (Pettinger, 2016).
Therefore, there is a possibility of great economic growth within a country as a result of low inflation rather than slowed growth as discussed by Irwin. There is a possibility of having low inflation, increased employment rates and continued economic growth within a country provided the right policies are implemented. Additionally, there is also need of incorporating other external factors like political stability and technological advancement. With all these factors in place, then low inflation can be of benefit to a nation rather than a disadvantage (Pettinger, 2016).
References
Irwin, N. (2017). The Low Inflation World May be Sticking around Longer than Expected. The New York Times . Retrieved May 22, 2017 from https://www.nytimes.com/2017/04/26/upshot/the-low-inflation-world-may-be-sticking-around-longer-than-expected.html?rref=collection%2Ftimestopic%2FEconomics&_r=0
Pettinger, T. (2016). Low Inflation and High growth. Retrieved May 22, 2017 from http://www.economicshelp.org/blog/24015/economics/low-inflation-and-high-growth/
Wolfers, J. (2017). The Economy May be Stuck in a Near-Zero World. The New York Times . Retrieved may 22, 2017 from https://www.nytimes.com/2017/04/07/upshot/the-economy-may-be-stuck-in-a-near-zero-world.html
