[Vnbiz] Inflation Control

[Tran Dinh Hoanh]

Dear anh Shane & anh Binh,

Thanks for the notes, brothers.

Anh Shane, of course, Vietnam export crude oil and import refined oil.
 But the price of refined oil has increased because the price of crude
oil increases worldwide .  Give and take a little, probably the effect
is not big on Vietnam.  It gains some additional money on crude oil
export, and loses some on refined oil import.  Probably a wash, or if
not, then some very minor effect on inflation.

And Binh, generally speaking inflation means you pay a higher price
for what you buy.  Say, on Jan 1, 2007 you pay 100,000 dong for a
shirt.  On December you pay 120,000 dong for the same shirt, that
would be 20% increase in price.  If "all" the price of all products
and services increases 20 percent in a year, the inflation rate for
that year is 20%.

I put the word "all" in parentheses because that is not true.  People
usually measure inflation by using a sample of a number of household
products and services (shirts, shoes, rice, etc...) and not "all"
services and products.  They calculate the average price of this
sample, and use that average price as Consumer Price Index or CPI.
Say, if the average price for this sample on December 31, 2006 is 175,
and the average on  December 31, 2007 is 200, then the price has
increased by 25 units during that period.  If you designate December
31, 2006 (price of 175) as the base CPI, meaning CPI=100, then the CPI
for December 31, 2007 would be 100 + (25/175)@100 = 114.29

That is a simple explanation to explain the concept.  Of course,
statisticians will make the calculation much more complex.  You can
read more about CPI at
http://en.wikipedia.org/wiki/Consumer_price_index

Now what cause inflation?  Meaning, what cause the prices to increase?
 You can answer this by common sense, anh Binh.  When there are more
people going out to buy things and sellers have less things to sell,
prices will increase.  Say, before Tet many people are out to buy
tickets to travel back home, and we have the same number of buses, xe
om and trains, so the prices of travel tickets increase.  That is the
fundamental concept.

The next 2 questions are the real art:  What cause many people to go
out to buy things?  Or what cause sellers not to have enough things to
sell?   You can sit there and imagine a thousand reasons for them.
That is where economists start to look.  And as you can see, each one
has a different eyesight, the one with the best eyesight may have a
better chance to see the real causes.

Hope this helps, anh Binh.

Have a great day!

Hoanh
______________

On Sun, Feb 24, 2008 at 2:07 PM, Shane Wall
<shane.wall at translingualexpress.com> wrote:
> [ Vietnam Business Forum ]
>
>
> Hi Bro Hoanh,
>   Slight correction. Vietnam currently has no oil refining capacity, so
> exports crude oil but must import the more expensive refined petroleum
> products. The price differential makes this a slightly more important
> piece in your argument about the causes of inflation.
>
> Shane
> ----------------------------------------------------------------------
> Mr. Shane Wall
> Managing Director
>
> Trans Lingual Express
> 188/16 Nguyen Thuong Hien St,
> P.1, Q. Go Vap, HCMC,
> Vietnam
>
> Mail: shane.wall at translingualexpress.com
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>
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>
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>
>



-- 
Tran Dinh Hoanh, Esq., LLB, JD
Washington DC