Saturday, August 4, 2007

Business And Inflation

I don't know how many people know about this that Businesses love Inflation for the reasons i believe are root cause for their profit growth.
We all know that biggest borrowers are Goverments and Big/Medium Businesses and they suck out very large portion of available credit (and that too very cheaply)in the market, leaving small players to borrow at hight Interest Rates.
Well they say:- Money is sufficient but there are very few things to buy!
Businesses can create artificial demand-supply situation(sometimes it's geniune), raise their product prices citing inflation as reason even though they are not facing input cost pressures, thus earn huge profit with similar sales growth.
And these same businesses also run banks and financial institution which give credit at high interest rates to small entities, thus further making credit costly. Cost of money is the Inflation in the hands of the borrower, more it is more it hurts.