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How does inflation correlate with more savings vs more spendings? (lemmy.nz)

submitted 11 months ago by luthis@lemmy.nz to c/asklemmy@lemmy.ml

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A recent article: https://www.stuff.co.nz/business/money/301022706/prepare-to-find-another-70-a-week-to-get-by-in-2024-asb

says: ..if households decided the worst was over and started to feel more confident about spending, it could push up inflation

But I thought it was the opposite;

More spending means more demand means more supply, which means production costs go down (due to economies of scale)… so inflation goes down?

But saving means less spending, means less demand, means less income for business, means costs go up.. so inflation would rise?

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[–] NZV65572@lemmy.world 3 points 11 months ago (2 children)

I am not familiar with what's happening in NZ and I don't completely understand the payment thing. Does everyone in NZ get a basic monthly income?

As for your question about inflation. There are several factors at play so too much demand for goods and a stressed supply can cause price inflation. But I think we have mostly moved passed supply constraints... at least in the industry I work.

Monetary policy like hiking federal fund rates is designed to make the cost to borrow higher, which makes larger purchases less affordable, so you hold off on purchasing a car or a house or other items, tampering demand, so inflation goes down.

Savings? That's not something they talk about in America too often because we are an economic that thrives on dept, but I think in other parts of the world it is the norm to always be living within your means and putting away savings.

[–] 0x4E4F@infosec.pub 2 points 11 months ago

Does everyone in NZ get a basic monthly income?

There are a few countries out there that do statistics and reference their salary on a yearly cycle, the US included. Most cointries express the avarage salary on a monthly basis. We don't think in terms how much do I make in a year, we think in terms of how much do I make in month cuz... well, we don't get yearly paychecks, we get monthly paychecks. It's just easier.

[–] livus@kbin.social 1 points 11 months ago

Not sure what "payment" you're referring to, but no New Zealand definitely does not have a UBI.

It has a monetarist economy with a target inflation of 1-3% and has been running at up to 7% in recent years.