Asset Prices,Interest Rates And Inflation

With the development and integration of global economy and trade, both developing and developed countries are facing inflation problems. Open market economy, on the one hand promoted the fragmented commodity markets to continued integration and development. On the other hand, it accelerated the unity of financial market and the rapid process of cartel. The booming financial market has gradually replaced the commodity market and become the core to promote worldwide economic development. Along with the emergence of huge monopoly capital, the important function of financial markets has transferred into how to find an appropriate access to high profits for such assets. People in the majority of commodity area could prevent the existence of cartel, a form of monopoly, but could not stop the formation of large financial cartel in the areas of financial markets. In fact, ignoring the existence of monopoly of financial capital and the nature of global expansion would necessarily lead to an incorrect understanding of the root causes of global inflation; it can not fundamentally avoid economic risks brought about by inflation.The function between asset prices, interest rates and inflation is similar to the basic characteristics of Phillips Curve in Keynesian economic theory. The quantity relations shows that low interest rates, high-yield assets and a high rate of inflation are symbiotic in existence, or the state of continued low interest rates and high asset prices is at the expense of the continuous rising rate of inflation. The Phillips Curve, which models inflation, is to analyze the two existing states of currency prices (the negotiable and non-negotiable status) to study the decisive factor in the currency price's transformation between different states, obtain the alternative function between asset prices, interest rates and Inflation and analyze the different roles of currency as equivalent and financial product in general commodity markets and financial markets. Starting with the monopoly currency interest rates of the monetary regulatory authorities and the asset price yield controlled by the financial capital, we can find the fundamental reason why inflation cannot be eliminated from economic activities is the role monopoly power of financial markets plays in currency prices, so as to provide new analytical tools to curb inflation in the open economic environment. To curb inflation, interest rates we should not only use monetary tools, but also give full consideration to the change of capital price. In fact, to curb inflation is to prevent monopoly forming cartel institutions in the field of financial market and fight against the financial monopoly currency prices. By adopting floating exchange rate mechanism and market-oriented interest rate strategy and appropriately restricting the scale of monopoly financial capital, we can guide the flow of financial capital orderly, which is the only prerequisite for the prevention of inflation at present.