A very simple equation that everyone can understand:
Goods = Domestic Currency (VND) + USD + Gold.
When companies face difficulties and production and business activities are halted or slowed down, goods on the left side decrease while domestic currency remains abundant in the market.
Gold increases, which will stifle credit, no one will borrow for production or business, and no one will take on debt.
Rising US interest rates will increase the interest payments on debts denominated in USD incurred by organizations, governments, and businesses.
Meanwhile, selling prices cannot increase because people are unemployed and tightening their spending.
The increase in USD/VND and the increase in input costs will increase the cost of goods, while selling prices cannot increase or businesses wait for each other to increase prices according to game theory. Inflation is a state of currency devaluation, manifested by:
- Increased prices of goods
- Decreased portions or quantities
Therefore, businesses have only a few options to deal with inflation, as described below.
