What is Biflation?

Many senior economists are starting to agree that the current economic conditions some countries face, differ to the traditional boom to bust to boom cycles- we had in the past. Biflation is the new buzzword for many of our 21st century economies. What does biflation mean?

Biflation simply means the value of the things we own and produce are devalued, whilst the cost of the things we need are continuing to rise. Add in the mixture of rising energy prices in energy poor countries, and depleted confidence in nuclear energy. Then many countries could be in a biflation cycle.

In many parts of the world, housing has declined in value, whilst owing to a dependency on imported energy-the cost of food, and buying this energy has risen. There are also other factors that can create biflation.

Quantative easing (printing money) devalues a currency, and it also compounds a nations debt. Nations that are dependent on importing food and/or oil pay more, whilst the value of their currency naturally declines with these rising debts.

A higher debt creates the need for any government to raise funds to pay off their creditors. This usually is passed onto the taxpayer, in the form of increased taxation and reduced services. Once this cycle kicks in, unless salaries rise with these costs. People have less to spend on consumer goods, and the local economy could see a fall in the cost of housing.

In the much of the world, the majority of people working are seeing a decline in real salaries, as basic costs like electricity, fuel and food continue to rise. Cutting into the spending and borrowing power of many consumers who fueled the pre- crisis 2008 bubble economy.

This natural cycle of biflation (mixflation) creates a climate of reduced earnings, higher basic living costs and low wage employment growth. In a sense, many experts claim Greece, Ireland, Portugal and the United States of 2011-2012 mirrors this modal.

Many of these same economists, cite energy costs determining the immediate future of any nation in a biflation cycle. Rising energy prices naturally create rising power, and transport costs, leading to higher food costs. chocolate, soya beans and wheat prices already are at their highest since before the 2008 crisis began.

If this momentum continues to develop through this decade, the nations that export these valuable resources grow wealthier, whilst countries dependent on importing such resources like coal, oil, and even food continue to grow poorer.

Biflation, is a dangerous cycle which could be termed the “long road down” if it remains unbroken. Yet, solutions have to be found to stem this vicious trend, or biflation could become the buzzword of this decade.

Source by Mark W. Medley

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