Study On Deflation Effect From Rent-on-land-push Inflation

The rent-on-land-driven inflation is the inflation pushed by the rising price of land products, which is accordingly driven on the one side by the rising cost of land products, and on the other side by the rising of the rent on land. The rent-on-land-driven inflation should not be classified as one type of inflation in real sense because rent on land is one essential part forming the value of land products and the inflation driven by rent on land is the result of the rising of the value of land products as well as the requirement of the realization of the value. When the land products claim higher value, it not only means that more money will be needed to realize the value, but the bias of the distribution of social income to the land owners. In order to ease the pain caused by the change of social wealth distribution structure, the decreasing of workers'real salaries, and the contraction effect of the manufactures, it becomes necessary politically for the government to allow, or even create on purpose, certain kinds of inflations, such as inflation driven by salary, profit and so on. Meanwhile, land products markets is often a speculative market as the demand and supply in this market has the characteristic of lack of elasticity in short-term. The factors mentioned above make the inflation driven by rent-on-land a complex development characteristic. With the effort to offset the negative effects of rent-on-land inflation, Macro-economy policies should coordinate the economy cycle with the inflation cycle of rent-on-land domestically, and solve the policy conflicts between developing countries and developed countries internationally. To cope with the rent-on-land inflation is not to diminish the inflation or to constrain price from rising, but to control the pace of inflation with the limits of social acceptance, or the only result would be the deflation. In the premise of loose Macro policies, esp. the loose monetary policies, current inflation targeting is a feasible policy which looks into various needs, while effectively copes with rent-on-land inflation.