Loading...Preventing economic inflation is easy
High rates of inflation are caused by the government’s increasing the money supply too rapidly. A growing economy always has a growing demand for money because with more stuff to buy, you need more money with which to buy it. To keep the overall level of prices constant, increase the money supply at the same rate that demand is increasing. If the supply of money increases faster than the demand, the value of money falls, creating an inflation. I recently encountered this idea again in this populist book: https://www.dummies.com/book/business-careers-money/business/economics/economics-for-dummies-3rd-edition-282166/
True…. but the overall cost is much higher, than if you just kept a healthy rate of inflation. you can read more here https://www.bankofengland.co.uk/explainers/what-is-inflation
such as
“A low and stable rate of inflation helps to create a healthy economy.
The Government sets a target for how much prices overall should go up each year in the UK. That target is 2%. It’s the Bank of England job to keep inflation at that target.
A little bit of inflation is helpful. But high and unstable rates of inflation can be harmful.
If prices are unpredictable, it is difficult for people to plan how much they can spend, save or invest.
In extreme cases, high and volatile inflation can cause an economy to collapse. Zimbabwe is a good example. It experienced this in 2007-2009 when the price level increased by around 80 billion per cent in a single month.
As a result, people simply refused to use Zimbabwean banknotes and the economy ground to a halt.”
That may be true for an economist, but the easiest way for politicians to do it is by raising taxes. There’s your problem.
Sorry, had to add this pic to the idea