Neolibralisme's Relationship with inflation

Chapter 1

Definition of Neolibralisme

That neoliberalism is an economic understanding or an economy that performs detailing on classical economic schools. So the point is that in understanding the economy will require the slightest intervention from the government in controlling mechanisms and letting the market compete perfectly.

There are some people neoliberalism figures and what is clear, according to Hayek, what solutions seeking to offer by keynesian about foreign exchange are inaccurate to control the economy or maximize market potential.

In his Serfdrom Hayek book, it also explained that the economy should be left to work according to the perfect market mechanism, meaning that modern government should not interfere, so he doesn't pay attention to his name as a minimum wage subsidy of workers’ fate and so on. The reason is that when wealth develops, the economy is also growing.

This understanding is not too used when major depression occurs in the 1930s of the countries more in reference to what John mayner keys describes in general theory.

When the free competition market occurred they also didn't deny anyone who won and some are the lost and Besides, they also had opposite views with the economy of socialism or socialist businesses. They don't care about their connectivity, that doesn't care about their minimum wages also not pay special attention to working-class classes, that's what people adhere to neoliberalism.

In addition, they also support its thing as privateisation, because they think privatizing it will have a positive impact on the market mechanism that is Neolibralisme, and this is clearly contrary to what John mayner Keyness thinks.

In the general theory so if according to Keyness socialism, ultrasosialisme or even komunism is not the answer for economic problems. But on the one hand it gives them completely to the market mechanism, it is also not something that's why Keyness came with Government Lending Speci, Well, that is the definition of neoliberalism itself which they require a mix of government in market mechanisms.

In the general period of depression this theory begins to be considered obsolete and began to be considered irrelevant, Why? because when the big depression of developed countries in the adoption world what Keyness put forward.

Hence was born with an economic schools called Keynesian which until the second became one of the economic schools that was still used by countries around the world and until then Keynesian was considered to be economic schools without a gap until in the end of the early 1970s.

In the 70s there was an economic condition that which inflation and stagflasi occurred simultaneously and it was called stucknasi, the first proposed by a British politician from a conservative party where he said the inflation situation and stugnan occurred simultaneously. And it turns out that in the situation Keynesian cannot provide any recipes or anything to overcome his stagflasi is where neoliberalism is going to rise again.

Chapter 2

Stugflasi

Here will explain and explain how when the inflation occurred. That inflation is actually not to be eliminated but controlled because low inflation will be beneficial for economic growth. When inflation occurs in the prices of goods, but on the one hand it increases the volume of economic transactions that occur in a country and as the volume of transactions increases, the unemployment rate will decrease, so that economic growth can be increased.

But the problem is that when inflation occurs but economic growth does not exist stagnant or even down there is no ground there and followed by the unemployment rate declining, but it turns out that there were times the unemployment rate actually rising even though inflation occurred.

When inflation occurs in the unemployment rate and economic growth is stagnant and even down, the condition is called stugflasi. And this is completely avoided by the whole country in the world when inflation and stagnation occur together. And that's been happening in England and America in 1970.

Chapter 3

The cause of Stagflasi and Rise

At that time America's president at that time, Ronald Reagan made a very, very controversial decision, he ended up leaving what his name keynesian and turned to neoliberalism that had been thought to have miserable the lower middle class society in the United States.

Why does this happen.

1. because America issued a very large spending on Vietnam and obviously it was not effective in the economy and did not produce a major contribution in the economy of the US society at that time.
2. The embargo from OPEC, because the OPEC itself turns out to be to embargoed countries that support Israel at that time including the United States itself, while their oil production couldn't meet its needs. Hence the oil price rises to 300% after the Embargo from OPEC. Then there was the Iranian revolution in the 1970s hitting the United States.
3. the bretton Woods problem, so the underline dollar is gold into each capital flow so there will be more gold that The Fact is claimed to the point where the gold is no longer enough. That's why since then it began to collapse called the breaton Woods, finally Richard's president revoked dollar-free exchange and gold with the breaking of this main pillar of the Bretton Woods. Collapse of these systems with the absence of legal boundaries in the amount of money scored by dollar scores also fell quickly since 1971 dollar purchasing power kept up to 85% of the United States since 1971 that reached 545.88%.

Wow, this situation is responded using mahzab keynesian and means that this mazhab pores on the request of aggregate specs. Loosening of the interest rates is also carried out, the money made is more likely to reduce unemployment rates in the United States and even improve the misery numbers.

Finally, the United States president at that time Ronald Reagents with his reagennomics, chose a Extreme step where he adopted Hayek's thinking that had started being left behind by the time about the market mechanism, meaning instead of government must go down deeper which is done is to reduce the role of the government in the economic system that is what Ronald Reagents and Margareth teach did in Britain.

Had time to be about other words, the simple language to relieve United States deliberately made a recession into interest rates that were originally relaxed extremely.

After being abandoned consistently by the company's owners were helped their taxes cut in hope when their taxes cut had greater profit margin and making greater wealth. When they are richer, from them can open more job opportunities for people, and here's what is called title down.

Means that if it worked what Hayek is right about neoliberalism is true?

Should all of the countries apply that? Does that mean Keynesian should be left by everyone? Explanations are in the next chapter.

Chapter 4

Economics, Medicine and Disease

The theory of the economy is like disease and medicine, not every cure condition is not every drug in the same condition. The analogy is like this;

1. If for example, we are headache so we will look for Paracetamol and it is really effective to relieve headache, but will not effectively relieve hives.
2.  Not every headache, Paracetamol sometimes there is a condition where the head of drinking Paracetamol and still don't get well.

Likewise, we look at the economy, the economy can't see from one layer he is very broad spectrum he needs to be diagnosed and he needs to identify problems until the right solution is found. So not every crisis can be completed with Keynesian or as the theory put forward by Hayek.

It is wrong if we interpret that the neoliberalism that managed to address the American economic issues in the 70 to the 80s and in other situations will also be just as successful, isn't it. For example in 2008 the handling back again to Keynesian, back again in interest rate violations, and physical quantitative.

So that's why if friends have interests in the field of economic science, the first thing we must understand is please blank imples.

When we find the new knowledge, always put on his name skeptisme like that it means that Don't suddenly believe this is the only solution and the name in economic theory not something that can be tried by errors as it please. Why is that? because it comes to the livelihoods of many people.