Tuesday, September 25, 2012

Inflation over time

A graphic from Apple Daily, Sept 24, reminds us why the Ma Administration is thrusting Taiwan into the Senkakus mess: because the gov't needs a good distraction. Inflation ticks along at a steady pace, normal but painful in a nation with stagnating salaries. The list shows the price changes in goods since 1998, including rent -- a 30 ping apt has risen from $15K to $22K a month, not one of the bigger rises. Ordinary people are being forced out to the Taipei burbs.... or farther. Masking the effects of price rises is the Taiwanese habit of living at home until marriage, meaning that many people are being subsidized by the wealth their parents accumulated a couple of decades ago in the waning days of the go-go era.

Not all of this is under government control, and it is notable that water and electricity remain cheap -- water is the same price it was 13 years ago. Where the government can intervene to keep prices low, it has -- yet low water and electricity costs keep Taiwan investing in heavily subsidized water and electricity hungry industry, instead of clean industries of the future.

Youth unemployment is rising, as the overall unemployment rate reached 4.4%, according to the government's figures. Monthly employee overall compensation actually fell marginally. The NT is on the rise, hurting exports too.....

ADDED: The Cabinet refused a raise to the minimum wage too...
Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums! Delenda est, baby.


Grant said...

But don't worry, the EFCA will save Taiwan. Its all part of the plan!

Andrew Chen said...

I don't have any stat on the historical NTD M3 money supply but wouldn't be surprised to see a similar phenomenon, like US, in which the credit market experienced exponential growth in the last 20+ years. My theory is that such a trend (if indeed the case) had not only helped fueled the stock and housing frenzy in the past but is now directing toward commodities and agricultural goods, and we are now witnessing the immediate impact and hurt on the consumers.

And if I were have to continue my conjecture most of the credit out of thin air was prompted and originated by the central banking actions, especially since the Central Bank of Taiwan performs open market operations, set the discount interest rate, and provided liquidity window for swaps just like the Fed. It is all the more likely that inflationary pressure, whether be it from housing or food, is often the unintended consequences of public monetary policies acting as the agent of price watch rather than letting free market determines where the best interest rate should be.