What is Cost-Push Inflation?

Cost-driven inflation, also known as cost inflation or supply inflation, refers to the continuous and significant increase in the general price level caused by the increase in supply-side costs in the absence of excess demand.

Costs drive inflation

Cost-driven inflation, also known as cost inflation or supply inflation,

Cost-driven inflation can be divided into three types due to different reasons for rising costs: wage-driven, profit-driven, import-driven, and export-driven.

1. Wages boost inflation

Under the condition of constant aggregate demand, if the increase in wages leads to an increase in the unit cost of products, it will lead to an increase in prices. After the price rises, if workers demand higher wages and increase costs again, prices will rise again. This cycle is called the wage-price spiral. Many economists regard inflation experienced by most European countries in the late 1960s and early 1970s as wage-driven inflation. For example, in federal Germany,

Over the years, what China has bought has increased its price. Before inflation occurred, many people repeatedly stressed that we cannot have inflation because we have a large amount of excess capacity; but we just forget that inflation is not necessarily driven by demand, but can be driven by costs. China imports a large amount of crude oil, iron ore, coal, soybeans, grain, etc. These commodities are all going up in price internationally. As costs rise, it is impossible for domestic prices to rise. This is global.

In the current Chinese economy, various problems are emerging, such as shortage of migrant workers, widening income gap, contradictions caused by demolition, inflation, pressure on energy resources and the environment. I think the pressure of China's economic transformation was not brought about by the US financial crisis. Before the financial crisis, the Chinese economy began to change in these factors, forcing us to transform.

In the long run, technological progress and innovation capabilities are the key to China's successful economic transformation and the most basic guarantee for long-term development. In fact, in the mid-1990s, we were talking about changing the way of economic growth. At that time, many people did a lot of research, but why the effect was not obvious, because it was not at this step, and did not feel the constraints of resources and the environment, and labor costs A lot of accumulated problems, such as rising pressure, have emerged, forming various contradictions. To promote China's structural adjustment, SMEs are the most important subjects, and SMEs and private enterprises are the most dynamic. At the same time, we must break through industry monopolies, especially administrative monopolies and oligopoly, and narrow the income gap.

Moderate inflation means that most people can share the pain of deleveraging with a few upper-class societies, which have gained too much in the past three decades because of lax regulation, globalization, and low inflation policies. The Fed and other agencies can no longer be intimidated. Compared with the 9% unemployment rate, the possible adverse effects of inflation of 3% to 4% are minimal.