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The Cost of Living
Do you remember back in 2010 when Coca Cola and Pepsi both raised their prices from 100 to 150 fils for the soft drink cans? It was their first price hike in 30 years, with both companies blaming higher input costs, including labor and raw materials. I recall it caused quite a stir. Some of my family members even switched to other soft drinks in protest (to RC Cola? I don’t think that boycott lasted too long).
Although that was a notable case given the sudden jump for heavily consumed products, inflation is pretty much a fact of life nowadays for most things we buy. It can feel almost inevitable, maybe even some kind of natural law. From homes to cars to vegetables to private education, all tend to follow an upwards drift over time.
Some background
In theory, there are several causes of inflation. It can happen through supply shortages and bottlenecks (droughts, oil embargoes, bad policy, global pandemics etc.) which push prices up across the value chain. Inflation can also appear when governments print too much money to finance their spending, diluting the currency. Maybe the most famous case is 1920’s Germany: after WW1, the Weimar Republic government minted a lot of new money to pay off reparation debts to the victors of the war, only to make its own Papiermark practically worthless. As hyperinflation destroyed the value of the Mark, Germans…
