Engry Angel

Apartheid was a system of racial segregation enforced through legislation by the National Party (NP) governments of South Africa. In this system, which lasted from 1948 to 1994, the rights of the majority black inhabitants of South Africa were curtailed and white supremacy and Afrikaner minority rule was maintained. South West Africans were also victims of apartheid as this country was administered by South Africa under a League of Nations mandate until it gained independence as Namibia in 1990.

Apartheid as an official policy was introduced following the general election of 1948. New legislation classified inhabitants into four racial groups (“native”, “white”, “coloured”, and “Asian”), and residential areas were segregated, sometimes by means of forced removals. Non-white political representation was completely abolished in 1970, and starting in that year black people were deprived of their citizenship. The government segregated education, medical care, beaches, and other public services, and provided black people with services inferior to those of white people.

Apartheid sparked significant internal resistance and violence as well as a trade embargo against South Africa. In addition to the unrest resulting from the internal protests, the sanctions placed on South Africa by the West made it increasingly difficult for the government to maintain the regime. In 1990 President Frederik Willem de Klerk began negotiations to end apartheid, culminating in multi-racial democratic elections in 1994, which were won by the African National Congress under Nelson Mandela.

Demand-pull inflation occurs when there is an increase in aggregate demand, categorized by the four sections of the macroeconomy: households, businesses, governments and foreign buyers. When these four sectors concurrently want to purchase more output than the economy can produce, they compete to purchase limited amounts of goods and services. Buyers in essence “bid prices up”, again, causing inflation. This excessive demand, also referred to as “too much money chasing too few goods”, usually occurs in an expanding economy.

Factors Pulling Prices Up

The increase in aggregate demand that causes demand-pull inflation can be the result of various economic dynamics. For example, an increase in government purchases can increase aggregate demand, thus pulling up prices. Another factor can be the depreciation of local exchange rates, which raises the price of imports and, for foreigners, reduces the price of exports. As a result, the purchasing of imports decreases while the buying of exports by foreigners increases, thereby raising the overall level of aggregate demand (we are assuming aggregate supply cannot keep up with aggregate demand as a result of full employment in the economy). Rapid overseas growth can also ignite an increase in demand as more exports are consumed by foreigners. Finally, if government reduces taxes, households are left with more disposable income in their pockets. This in turn leads to increased consumer spending, thus increasing aggregate demand and eventually causing demand-pull inflation. The results of reduced taxes can lead also to growing consumer confidence in the local economy, which further increases aggregate demand.

Putting It Together

Demand-pull inflation is a product of an increase in aggregate demand that is faster than the corresponding increase in aggregate supply. When aggregate demand increases without a change in aggregate supply, the ‘quantity supplied’ will increase (given production is not at full capacity). Looking again at the price-quantity graph, we can see the relationship between aggregate supply and demand. If aggregate demand increases from AD1 to AD2, in the short run, this will not change (shift) aggregate supply, but cause a change in the quantity supplied as represented by a movement along the AS curve. The rationale behind this lack of shift in aggregate supply is that aggregate demand tends to react faster to changes in economic conditions than aggregate supply.

As companies increase production due to increased demand, the cost to produce each additional output increases, as represented by the change from P1 to P2. The rationale behind this change is that companies would need to pay workers more money (e.g. overtime) and/or invest in additional equipment to keep up with demand, thereby increasing the cost of production. Just like cost-push inflation, demand-pull inflation can occur as companies, to maintain profit levels, pass on the higher cost of production to consumers’ prices.

The Bottom Line

Inflation is not simply a matter of rising prices. There are endemic and perhaps diverse reasons at the root of inflation. Cost-push inflation is a result of increased costs of production, itself a result of different factors. The increase in aggregate demand causing demand-pull inflation can be the result of many factors, including increases in government spending and depreciation of the local exchange rate. If an economy identifies what type of inflation is occurring (cost-push or demand-pull), then the economy may be better able to rectify (if necessary) rising prices and the loss of purchasing power.

Inflation is defined as the rate (%) at which the general price level of goods and services is rising, causing purchasing power to fall. This is different from a rise and fall in the price of a particular good or service. Individual prices rise and fall all the time in a market economy, reflecting consumer choices or preferences and changing costs. So if the cost of one item, say a particular model car, increases because demand for it is high, this is not considered inflation. Inflation occurs when most prices are rising by some degree across the whole economy. This is caused by four possible factors, each of which is related to basic economic principles of changes in supply and demand:

Increase in the money supply.
Decrease in the demand for money.
Decrease in the aggregate supply of goods and services.
Increase in the aggregate demand for goods and services.
In this look at what inflation is and how it works, we will ignore the effects of money supply on inflation and concentrate specifically on the effects of aggregate supply and demand: cost-push and demand-pull inflation.

Cost-Push Inflation

Aggregate supply is the total volume of goods and services produced by an economy at a given price level. When there is a decrease in the aggregate supply of goods and services stemming from an increase in the cost of production, we have cost-push inflation. Cost-push inflation basically means that prices have been “pushed up” by increases in costs of any of the four factors of production (labor, capital, land or entrepreneurship) when companies are already running at full production capacity. With higher production costs and productivity maximized, companies cannot maintain profit margins by producing the same amounts of goods and services. As a result, the increased costs are passed on to consumers, causing a rise in the general price level (inflation).

Production Costs

To understand better their effect on inflation, let’s take a look into how and why production costs can change. A company may need to increases wages if laborers demand higher salaries (due to increasing prices and thus cost of living) or if labor becomes more specialized. If the cost of labor, a factor of production, increases, the company has to allocate more resources to pay for the creation of its goods or services. To continue to maintain (or increase) profit margins, the company passes the increased costs of production on to the consumer, making retail prices higher. Along with increasing sales, increasing prices is a way for companies to constantly increase their bottom lines and essentially grow. Another factor that can cause increases in production costs is a rise in the price of raw materials. This could occur because of scarcity of raw materials, an increase in the cost of labor and/or an increase in the cost of importing raw materials and labor (if the they are overseas), which is caused by a depreciation in their home currency. The government may also increase taxes to cover higher fuel and energy costs, forcing companies to allocate more resources to paying taxes.

Putting It Together

To visualize how cost-push inflation works, we can use a simple price-quantity graph showing what happens to shifts in aggregate supply. The graph below shows the level of output that can be achieved at each price level. As production costs increase, aggregate supply decreases from AS1 to AS2 (given production is at full capacity), causing an increase in the price level from P1 to P2. The rationale behind this increase is that, for companies to maintain (or increase) profit margins, they will need to raise the retail price paid by consumers, thereby causing inflation.

By Matthew Johnston | Updated February 11, 2016

Interest rates are generally assumed to be the price paid to borrow money. For example, an annualized 2% interest rate on a $100 loan means that the borrower must repay the initial loan amount plus an additional $2 after one full year. On the other hand, a -2% interest rate means the bank pays the borrower $2 after a year of using the $100 loan, which is a lot to wrap your head around.

While negative interest rates are a great incentive to borrow, it’s hard to understand why anyone would be willing to pay to lend considering the lender is the one taking the risk of a loan default. While seemingly inconceivable, there may be times when central banks run out of policy options to stimulate the economy and turn to the desperate measure of negative interest rates.

Negative Interest Rates in Theory and Practice

Negative interest rates are an unconventional monetary policy tool and, until 2014, had never been implemented by a major central bank. The European Central Bank (ECB) became the first when its deposit rate declined to 0.2 percent in September, 2014. A number of other European nations turned to negative interest rates so that over one quarter of Eurozone government-issued debt had negative yields by the end of March 2015.

Negative interest rates are a drastic measure that show policymakers are afraid that Europe is at risk of falling into a deflationary spiral. In harsh economic times, people and businesses have a tendency to hold on to their cash while they wait for the economy to pick up. But this behavior can serve to weaken the economy further as the lack of spending causes further job losses and lower profits, thus reinforcing people’s fears and giving them even more incentive to hoard.

As spending slows, prices drop creating another incentive for people to wait as they wait for prices to fall further. This is precisely the deflationary spiral that European policymakers are trying to avoid with negative interest rates. By charging European banks to hold reserves at the central bank, they hope to encourage banks to lend more.

In theory, banks would rather lend money to borrowers and earn at least some kind of interest as opposed to being charged to hold their money at a central bank. Additionally, however, negative rates charged by a central bank may carry over to deposit accounts and loans, meaning that deposit holders would also be charged for parking their money at their local bank while some borrowers enjoy the privilege of actually earning money by taking out a loan.

Another primary reason the ECB has turned to negative interest rates is to lower the value of the euro. Low or negative yields on European debt will deter foreign investors, weakening demand for the euro. While this decreases the supply of financial capital, Europe’s problem isn’t supply but demand. A weaker euro should stimulate demand for exports, hopefully encouraging businesses to expand.

In theory, negative interest rates should help to stimulate economic activity and stave off inflation, but policymakers remain cautious because there are several ways such a policy could backfire. Because banks have certain assets like mortgages that, by contract, are tied to the interest rate, such negative rates could squeeze profit margins to the point where banks are actually willing to lend less.

Also, there’s nothing to stop deposit holders from withdrawing their money and stuffing the physical cash in mattresses. While the initial threat would be a run on banks, the drain of cash from the banking system could actually lead to a rise in interest rates – the exact opposite of what negative interest rates are supposed to achieve.

By Matthew Johnston | February 25, 2016

Looking around at the magnitude of death and destruction that resulted from the Great War, leaders of the some of the world’s major powers convened a conference in Paris, the outcome of which they hoped would ensure that no such devastation would ever happen again. Unfortunately, the combination of a poorly designed peace treaty and the most severe economic crisis the modern world had ever experienced brought about a deterioration of international relations that would culminate in a war even more calamitous than the one that preceded it.

The Pretense of Peace

The unfortunate irony of the Paris Peace Conference that begat the Treaty of Versailles was that, despite its authors’ best intentions to ensure a world of peace, the Treaty contained a seed that when sown in the soil of economic crisis would give rise, not to peace, but to war. That seed was Article 231, which with its label “the war guilt clause” placed sole blame for the war on Germany and its need to make reparations payments as punishment. With such extensive reparations payments, as well as forced surrender of colonial territories and military disarmament, Germans were naturally resentful of the Treaty.

As early as 1923, the newly constituted Weimar Republic began delaying payments on war reparations, which initiated a retaliatory response by France and Belgium. Both countries would send troops to occupy the industrial center of the Ruhr River valley region effectively appropriating the coal and metal production that took place there. As much of German manufacturing was dependent on coal and metal, the loss of these industries created a negative economic shock leading to a severe contraction. This contraction as well as the government’s continued printing of money to pay internal war debts generated spiraling hyperinflation.

While price and economic stabilization would eventually be achieved – partly through the help of the American Dawes plan of 1924 – the hyperinflation wiped out much of the life savings of the middle class. The political consequences would be devastating as many people became distrustful of the Weimar government, a government that had been founded on liberal-democratic principles. This distrust, along with resentment over the Treaty of Versailles, lent itself to the increasing popularity of more left and right-wing radical political parties.

The Great Depression and Deterioration of International Trade

The onset of the Great Depression would serve to undermine any attempts at creating a more open, cooperative and peaceful post-war world. The American stock market crash in 1929 caused not just a cessation of loans provided to Germany under the Dawes Plan, but a complete recall of previous loans. The tightening of money and credit eventually led to the collapse of Austria’s largest bank in 1931, the Kreditanstalt, which kicked off a wave of bank failures throughout Central Europe, including the complete disintegration of Germany’s banking system.

Deteriorating economic conditions in Germany helped the N**i party grow from being a relatively small fringe group to being the nation’s largest political party. N**i propaganda that put blame on the Treaty of Versailles for much of Germany’s economic hardships fuelled Hitler’s rise in popularity with voters, who would make him German chancellor in 1933.

If it drops by 61% in weekend two (on par with Spider-Man 3 and Amazing Spider-Man 2), it’ll gross $73 million and end the second weekend with $314 million, a ten-day total tied (sans inflation and 3-D bumps) with The Dark Knight. Yes, it could hold better due to the lack of big new wide releases (all due respect to Blumhouse’s Firestarter) and the fact that, online discourse aside, it’s a solid gateway horror flick for kids eight and up. But the sharp 2x multiplier and B+ Cinemascore make that not quite a foregone conclusion. That said, when studios don’t offer up a regular slate of theatrical releases, the biggies that do show up tend to stick around. And Doctor Strange 2 is “it” until Top Gun: Maverick over Memorial Day weekend

Whether it ends up above $1 billion, which is A) still very much in the cards and B) not remotely the bar for success, Doctor Strange in the Multiverse of Madness is yet another example of a theatrical tentpole playing about as well in Covid-era times as it would have in a pre-Covid/non-Covid environment. It’s also poised to be Disney’s first mega-hit since Star Wars: The Rise of Skywalker ($1.073 billion) in late 2019, which isn’t nothing considering the complicated narrative surrounding their Covid-era releases concerning theatrical glory versus Disney+ streaming gains. It would be nice if Disney could pull blockbuster grosses out of more than just an MCU movie, but they’ll get a chance when Lightyear (Pixar’s first pure theatrical since Onward) opens on June 17.

Never bet against Houston.
Never let some Vegas oddsmaker tell you how it’ll end up,
or the evening news tell you it’ll never be the same.
Never take on a city that has U.S. in the middle of it.
Never forget this is Houston we’re talking about.
World champions.
If you think that’s where this story ends, you’ve never been to Houston.