Agricultural products and food itself have no ability to promote inflation

Every time prices rise sharply, they are inevitably involved in agriculture and farmers. In the 1980s, I undertook investigation and research under the leadership of Comrade Du Runsheng, and I was troubled by this "connection." The recent price tightening, related arguments began again, familiar.

Taking the price of goods in November 2010 as an example, the National Bureau of Statistics announced that consumer prices rose by 5.1% year-on-year. According to a spokesman for the Bureau of Statistics, the main driver of China's rise in the price index in November was food, because “in November, the national food price rose by 11.7% year-on-year, stimulating the CPI to increase by 3.8 percentage points, and the contribution rate was 74%”.

The author noticed that when the CCTV spoke on the announcement of the price index by the spokesman of the National Bureau of Statistics, the word "contribution" displayed on the screen was quoted. The reports of various print media are also quoted as "contributions."

Then, did agriculture and farmers contribute to the overall price level? It seems to be there. In China's current CPI, food accounted for about 40% of the total, accounting for the highest proportion, and the impact of a small change is significant. As in November last year, food itself has the highest price increase (11.7%), and it is the highest weight in the price index (40%). Together, it pulled the CPI up by 3.8 percentage points year-on-year, accounting for a year-on-year increase in the overall consumer price index. 74% of percentage points. This contribution, real material.

However, saying that the increase in food and agricultural product prices has contributed to the price index does not mean that the price of food is the reason for the rise in the CPI, let alone that food and agricultural products are the culprits of inflation! Why did food prices rise? Why is the price of agricultural products high? According to the popular “cost-determining price” mentality, the increase in agricultural product prices is “topped up” by the increase in the cost of agricultural products. The cost of artificial agricultural products, fertilizers, agricultural resources, fuels, logistics, etc. has not been the same since this year. Was it very urgent?

Yes, everyone's output in the market constitutes the cost of others. To catch the source of inflation, buy rice to report rice, sell rice to report fertilizer, sell chemical fertilizer to sell chemical fertilizer materials, and sell chemical fertilizer materials to artificially expensive people because they eat rice. Turning around, it was found that each link was “innocent” and the price rise of all output products was due to the rising cost price of each upstream.

By linking all supply and demand together, chasing and chasing each and every link is the result of the pulling of demand - the demand of others for your products has led to your demand for upstream products. In this way, all costs are pulled up by demand.

There is no end to the needs of humanity, and the actual constraints are mainly the purchasing power of money. According to this definition, money is the key to demand, and it is also the real key to changes in the general price level. The rise in the price of individual commodities is due to the fact that the demand for this commodity exceeds its supply, and the rise in the general price level is because — and only because — the rise in aggregate demand exceeds the total supply. Any economy, where the supply of money is higher than the increase in goods and services, will always bring inflation. What “cost-based inflation” or “input inflation” is saying, leaving money and demand is a fantasy - if there is no money in a horizontal and vertical pocket, or if there is money, it will not go shopping, then any price will not rise. .

Therefore, it is nonsense to say that farmers, agriculture, and agricultural products have contributed to inflation. To be exact, rising prices of agricultural products and foods reflect inflation. Food prices, like any other commodity price, are determined by market competition in supply and demand. The total supply of money is too large and prices will be pulled up one by one. In any case, agricultural products and food itself are not capable of promoting inflation.