cheap gasoline; good or bad?
Ali Mirzakhani*
Is cheap gasoline good or expensive gasoline? The answer is obvious: neither, free gas is better than both! But the main problem is that there is no free lunch in the economy. In other words, wherever you get a free or cheap product, don’t doubt that they will charge you for it somewhere else, and maybe it will be more expensive!
The origin of Iran’s economic troubles in many issues, including gasoline, is not the wrong answer to the right questions, but is generally rooted in the right answer to the wrong questions. The correct question about gasoline should be asked like this: Where is the cost of cheap gasoline (the difference between the selling price and the actual price) settled with the people? And the more important question is: Is cheap gasoline worth paying this bill?
The fact is that in an inflationary economy like Iran’s economy, it is impossible to prevent the transfer of inflationary pressure to a specific commodity or basket of commodities except by spending huge costs. But for about half a century, Iranian governments have tried to invalidate this inviolable theory by turning Iran’s economy into a large laboratory; With the idea that in the conditions of inflationary pressure, it is possible to stabilize the price of gasoline or the price of imported goods (exchange rate) without imposing a bill on the people, and even with this lever, inflation can be controlled!
On the one hand, this wrong policy has caused jumps in the exchange rate every few years and gasoline shock therapy at certain times, and on the other hand, during the time intervals of these jumps and shocks, it has transferred the inflationary pressure to more essential goods. Dutch disease and Friedman’s balloon are simpler explanations of this inflationary pressure transfer. Friedman compares the economy to a balloon, the increase in liquidity in the economy acts like a balloon dying, and as a rule, the entire surface of the balloon should be inflated equally, but you can prevent the balloon from inflating at a certain point by pressing your finger, although this is possible. But inflation moves that part to other levels; The same thing that happens with the stabilization of gasoline and other special rates in the economy and the pressure of inflation is transferred to other groups.
For example, the ratio of the cost of buying or renting a house to the per capita income in Iran is much higher than in other parts of the world, or the fact that the government can successfully implement the policy of multiplying the price of low-quality cars, and these are only part of the bill for cheap gasoline. It is imposed on people. At the same time, if you pay attention to the bill of cheap gasoline, you can also see other items, the most important of which is financing the budget deficit caused by the cheap sale of gasoline from the money printing place (read the devaluation of the money in people’s pockets), which causes the aforementioned vicious cycle of inflation and taxes. strengthens./source:
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P.N.: We will find the answer to this question, what is the solution to get out of this situation, in the following articles.
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This post is written by Ssmh22