Inflation and deflation rocks the Icelandic economy

Inflation has been severe the last few months, and it has been high for years. This has ment that products have increased in value. Shoes and clothing have gone up 50% and the price of cars has skyrocketed. Sale of new cars for example has gone down 90% at least.

Corn and bread have gone up 37%. At the same time the amount people have to spend has gone down 10%.

The currency has fallen 80% in less than a year.

Iceland is in deep shit if nothing is done. The prices are going up, people are loosing jobs and they cant spend as much as they could a few months ago.

This situation is called Stagflation. Wikipedia has alot about that term.

“Stagflation is an economic situation in which inflation and economic stagnation occur simultaneously and remain unchecked for a period of time.”

“Stagflation has generally proven to be difficult and costly to eradicate once it gets started.
While mainstream economists today might often attribute short periods of stagflation (not more than a few years) to adverse changes in supply, they would not accept this as an explanation of very prolonged stagflation. More prolonged stagflation would be explained as the effect of inappropriate government policies: excessive regulation of product markets and labor markets leading to long run stagnation, and excessive growth of the money supply leading to long run inflation.”

To top it all….. “the effect of inappropriate government policies…”.

Ain´t that a surprise 🙂

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