In previous notes we referred to issues related to Inflation, a complex variable of not being controlled, similar to a two-sided currency, one side is seen by the Consumer supporting the "increase in prices" in products and services, the other side is warned by Economic Science under the phenomenon of loss of monetary value, as if it were a banknote that "shrinks" constantly.
I make this brief introduction since conceptually Stagflation is linked to Inflation.
Technically Stagflation is the fusion or crossing of two events:
1) Economic Crisis: in any admissible situation, be it an economic slowdown, a decline in GDP, a drop in industrial activity, a drop in Aggregate Demand and so on. 2) Inflation: loss of ticket value, as mentioned previously viewed by the Consumer as a constant increase in prices.
Let's agree… a complex question due to what is mentioned in the above lines, how is it possible that economic activity decreases simultaneously with the increase in the Architectures of Aggregate Offer Prices? industrial- and choose to increase prices?
Clearly, we can understand that Stagflation is one of the most inclement economic scenarios that a Country can experience, modifying for example the composition of Income P x Q (Price x Volume).
In general, the Nations that suffered or suffer from a context of Stagflation suffer it as an effect of not having resolved high inflation at the time, not having attended the growth of the Productive Capacity of the Country, added to other aspects related to these, final from history: a great disorder of economic variables; Of course, there is a way out of these critical states of economic disharmony.
As many Economists indicate, Stagflation can be linked to a process of Cost Inflation, where the quintessential Productive Economic Actor - "The Company" - has no alternative but to increase prices to maintain a "reasonable profitability" framework scrutinizing an acceptable waterline.
We know that there are three economic actors: State, Companies and Families (Consumer). I assume in intimate conviction that the Stagflation must be resolved from the Microeconomic to consequently order the Macro Magnitudes. It is essential to aggravate the Cost Structure of the Industries to contribute from the State and Knowledge Centers, to optimizing cost proposals, I understand that this is the beginning of the technical solution, working hard on the reduction of Industrial Costs will be feasible, of a metric nature, the price decrease will be viable by simple numerical logic.
Knowledge, Innovation, Thought, play a preponderant role in this, if the Companies manage to reduce their costs, the reason indicates that the price to the final consumer will be lower in the gondola, as we can conceive, the exit of the Stagflation begins in the Microeconomic, acting the State and all the Industries in order to achieve this reduction of costs. Once this first step has been completed, the Macroeconomic impact must be reviewed, that is… how regional consumption will be incentivized to strengthen its volume, how we will continue to incentivize the lower cost of capital (Interest), tending to lower said Rates in such a way that Access to Credit with Productive destinations is facilitated, orient Public Expenditure on Infrastructure to aid industrial development,relentlessly scanning the Exchange Rate in order to favor Exports without resenting Imports.
Conclusion: No one can deny that the growth driver of a Country is given in the well-being of the "entrepreneurial fabric"Therefore, any collaborative measure that the State can promote to the industrial sector is more than necessary, however this means a favorable wink to a liberal perspective of the economy, it is the most direct way of promoting the reduction of costs with which It facilitates the recovery of the Aggregate Demand, a situation that implies an improvement in the Consumer, let us also consider its dual role: on the one hand, it generates income in its value-generating worker profile, while reintegrating part of that income to the industries for the acquisition of what is produced, reaching the virtuous graph of Income / Investment, Income / Reinvestment. If this recipe of clear liberal cut solves the micro-economic factors, the macro-economic facets will be resolved more quickly.
