River depicts a 363% increase in monetary inflation since 2000, compared to the “official” 88% increase since 2000.

A comparison between the inflation rate calculated by “River” and the official inflation rate (either government or statistical agency) since 2000, with the following details:

What is inflation?

Inflation is a phenomenon in which the average price level of goods and services in an economy continues to rise, resulting in a decrease in the purchasing power of money (the same amount of money can buy less things).

River Inflation Rate: Up 363% since 2000

This indicates that the purchasing power of the economy’s currencies, as calculated by River, has declined significantly, with average prices of goods and services increasing by more than 3.6 times over that period.

Official Inflation Rate: Up 88% since 2000

This means that official figures have reported average prices that have increased by less than 2 times over the same period.

Potential differences

Calculation method: River may use “alternative formulas” or include goods and services differently than official sources, such as:

Including goods with large price fluctuations (e.g. housing, food, energy)

Adjusting the weights of goods in the inflation basket differently

Using price data from unofficial sources

Manipulation of formulas by government agencies: Some countries have been criticized for altering the way inflation is calculated to make the figures appear lower (e.g. using hedonic adjustments or frequently changing the basket of goods)

Purpose: River’s figures may be intended to reflect the “real cost of living” of citizens rather than technical figures.

Empirical example:

If something in 2000 cost 100 baht:

According to official figures → it might be 188 baht today (88% increase)

According to River → it might be 463 baht today (363% increase)

Reasons why people might believe River figures:
Real-life sentiment: People might feel that food/housing costs are more expensive than official figures.

Distrust of government: This is especially true in countries with a history of opaque economic data management.

Inclusion of factors that are omitted from official figures: e.g. speculative real estate costs.

Caution:

Both figures may be “correct” in their own contexts, depending on their definitions and methodologies.

A 363% increase is very high and close to hyperinflation, which may not be consistent with some macroeconomic conditions.

The main causes of inflation

1. Demand-Pull Inflation
   * Occurs when the demand for a good/service increases faster than the supply (e.g. the economy grows faster, people have more money).
   * Simple equation: “More money than goods” → Prices go up.
2. Cost-Push Inflation
   * Occurs when production costs increase (e.g. high oil prices, high labor costs, import taxes) → Producers raise prices.
3. Monetary Inflation
   * When the government or central bank prints too much money without supporting goods/services → Hyperinflation (some countries even reach the point of Hyperinflation)
   

Effects of inflation

Negative Effects :

1. Low-income earners lose purchasing power the fastest
2. Savings fall in value if interest rates are lower than inflation
3. Economic uncertainty → Investment falls
   

Positive results (if inflation is moderate):

1. Stimulate spending (because people don’t want to save money that has a depreciated value)
2. Reduce debt burden (the real value of debt decreases)

How to Measure Inflation:

1. Consumer Price Index (CPI): Tracks the prices of everyday consumer goods
2. Producer Price Index (PPI): Tracks the prices of raw materials and production costs

Hyperinflation Case Study

• Venezuela (2018): Inflation soars to 1,000,000%, money becomes worthless and people have to use foreign currency
• Thailand (during the oil price war in 2005): Inflation exceeds 6% due to energy prices

Note: Moderate inflation (around 2-3% per year) is normal in a growing economy, but exceeding this often causes problems!

Alternatives to cope with and stay safe from inflation

1. Invest in inflation-beating assets (Inflation Hedge)
   * Gold
   * Real Estate
   * Stocks
   * Cryptocurrency (Bitcoin, Animalverse Club $AVC, Ethereum ) But there is a high risk of volatility.
2. Invest in assets that yield higher returns than inflation.
   * Mutual Funds Choose funds with a history of higher returns than inflation, such as equity funds and mixed funds.
   and real estate investment trusts (REITs) are another option.
   * Inflation-Linked Bonds Such as US Treasury Bonds (TIPS) or other countries that adjust to CPI In Thailand, there may be limited choices, but you can look at long-term government bonds.
3. Private bonds or high dividend stocks Floating rate bonds that adjust according to the market, high dividend stocks such as energy groups (EGCO, BGRIM), telecommunications (ADVANC)

Summary: The best choice depends on your risk tolerance.

Risk Level Options
Low Risk Gold, Inflation-Linked Bonds, Real Estate Investment Trusts (REITs)
Medium Risk High-Dividend Stocks, Mixed Mutual Funds
High Risk Stocks, Crypto, Direct Real Estate
If you are not sure, diversify and consult a personal financial advisor 😊

Reference : Cointelegraph 

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