Increasing prices do reflect the 'total growth' of the monetary volume by the supply of credit money. The main economic agents of this financial mechanism are private commerical banks; central banking tries to police these monetary activities of the fiat credit economy.

You touched almost directly on the value of money theory of inflation. True inflation relates to the pushing of investments when the economy has reached its full employment level. Usually the reason is political, undertaken through overzealousness. Other areas of government involvement can be explained from the point of view of government policy actions to neutralize, extinguish, or accomodate inflation.

Also, we have to tell the lay persons something about the role of their aggregate expectation on prices. Mainly that inflation itself can lead to further inflation. Adaptive expectation can be explaind in terms of learing from one's mistake in the past. Rational expectation can be explained from the point of view of how one takes into consideration all news in their decision making.

Definitely price increase and inflation increase are not the same. If your intention is to compare for different periods, better make some price index or price relatives and then compare.

Increasing prices do reflect the 'total growth' of the monetary volume by the supply of credit money. The main economic agents of this financial mechanism are private commerical banks; central banking tries to police these monetary activities of the fiat credit economy.

On the one hand, when talking about a good number of times of price increase during two-three generations time isn’t about just inflation, or it is, but just indirectly. Inflation is price increase on the short time only and about this it produces its specific effects – nearly no effect now, when just finding it and making a few calculus about.

Then, it might be about inflation, but about some repeated inflation during a good while. Inflation equally keeps its money depreciation face. But on the one hand this issue isn’t simple at all, on the other tempting a full explanation about is nearly a teaching adventure, if not an assumed failure. All I can here say is mentioning that I already recommended our Srikanth Potharla colleague’s question started – all the more he isn’t an economist.

Back to my tempted answer to his question, at least let us see that there isn’t just inflation to talk about, plus, inflation itself isn’t quite a disaster either. The idea is that today all money (national currencies) do depreciate continuously (not only rupee) – and, once more, this isn’t any problem; the problem arises only when such depreciation is a shock one (from today to tomorrow and during the year). Actually, money depreciation, at least when moderate, is a symptom of money, a symptom without disease.

And now let me interrupt this description – for here coming back below – for explaining that such depreciation has a beginning – and this is (just take it as my view, only) or was the fall of the former gold standard for universal money, i.e. it occurred in the interwar period and after some other self-destruction precedents of that system. Or, recall how gold standard was simply like: prices were rather lowering, inflation was as rare and low due to being caused by some gold production rare booms in the late 19th century.

It is reasonable understanding that it was the gold metal resource at that time rising its individual price against the other commodities' ones. But not only – i.e. there were equally other causes of money appreciation at that time, e.g. much more market competition, less monopolies, no State’s involvement in economy by public spending and monetary policy ruling, less investments and economic development, less unemployment threat…

Gold standard has got bankrupted for its own causes and just after international money disorder came up. Roughly, since 1971 (fall of the new post-gold international monetary system) gold was fully out of any monetary system and since 1985 (i.e. the ‘La Platza-Louvre’ international conference) the non-gold monetary system regained its own order. Plus, the international dimension of all national currencies strengthens once more – but while in the national systems monetary policies do the same.

And now let us see the basic difference between gold standard and the today national scale monetary environment for understanding why and how at that time money was appreciating and today it is exactly the opposite. Gold standard meant no monetary policy – money supply was exactly the State’s gold reserves and the same State wasn’t controlling this money supply. Plus, the (small) minting house was all the State had, i.e. but this as rather its engagement for keeping the currency unit’s price.

On the contrary, when no gold standard any longer the State uses the central bank – and this is much larger than minting house; often including it – and this is really for controlling money supply. The last is just the first one that continuously increases for its own priorities – actually the State’s monetary policy purposes --, but of course, as a premise for the next future money’s continuous depreciation. Mr. Thernik is here very right – it is money supply rising that directly makes money depreciation. But, once more, this is either no any essential bad in this, or not the single money depreciation factor.

And finally, let me enumerate some of other money depreciation causes, except for the above debated aspects:

· market competition falling, more monopolies and oligopolies;

· investments rising, even crowding, while inflation factor;

· public spending rising, while inflation factor either,

· wages (and salaries) continuously rising, never falling, while the so-called ‘labour market’ isn’t quite a real market segment and labour is both costs and market demand for goods; and both boost inflation at the same;

· pressure on natural resources rising, as well, pushing up costs together with wages rising;

· international market prices’ behaviour since this market was demonstrated as no perfect competition either; then influences on domestic prices ;

· the fact that inflation is priory agreed by policy makers against unemployment or even against too much transparency about what happened to real wages and general life standard…

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Dear Dr.

In short farmers when strating production cycle have no price projections, which is coas of flutuations

See attached article.

Article ALTERNATIVE INVESTMENTS

http://unctad.org/en/docs/gds20111_en.pdf

http://www.cepii.fr/PDF_PUB/wp/2012/wp2012-20.pdf