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theblackw0lf posted:This description is not really in dispute among most economists. It’s how our government works. If that’s the case though then why doesn’t the government just spend whatever it needs to, or for that matter why doesn’t the government just give everyone a million dollars? For that matter, why do we even need taxes? Answer is inflation. If the government puts too much into the economy, without also taking money out of the economy via taxes, you can see high inflation, even hyperinflation. I just want to point out for the sake of completeness that inflation and hyperinflation are very different things. Inflation, even high inflation, does not cause or risk hyperinflation. Neither do inflation and hyperinflation have the same causes, effects or solutions. Inflation is an increase in general price level over time and has (also depending on your economic ideology) multiple causes, such as an increase in money supply (without a commensure increase in demand for money, aka economic activity) a price/wage spiral or unemployment. Inflation is infinitely preferably to deflation for a healthy economy (as under conditions of deflation people start hoarding their money and then poo poo breaks down, kinda like how austerity is a government "hoarding" its money and causing poo poo to break down) so central banks try to shoot for the ideal of a low % of inflation with their monetary policies. Hyperinflation is what happens when people lose confidence in the value of money en masse. That is, they believe the money currently in their possession will be completely worthless within a very short period of time, and so they all try to convert it into something with value (either another currency or something with intrinsic value, like food) immediately so that they are not the suckers left holding. This is comparable to a stock crashing after investors all lose confidence. The result is that everyone who possessed that currency loses. As people continue to incur tax obligations and continue to get paid in that currency however, if a government is particularly stubborn, this hyperinflationary spiral can continue for a long time, with the famous comical results of billion dollar bank notes and such. So in other words, this is what happens when people all decide that this particular currency is really just some nicely coloured fancy paper with no further meaning, which tends to be caused by massive political instability (on the order of magnitude of not believing a country will exist in the form that it does in the very near future) or deliberate political fuckery of a government with its currency, like when Weimar Germany decided to blow up its currency as a way to get out of Versailles reparation payments and resist French occupation of the Ruhr. So "wildly increasing the money supply" can indeed lead to hyperinflation, but only if a bunch of other requirements are met as well. Requirements like the increased money not being offset with an increase in economic activity or taxation, or a loss of ability (or at least credibility) of the issueing government to employ force to collect its taxes. You'll note that a large majority of hyperinflation occured in countries either at war, under occupation, during or immediately after a revolution (including the fall of communism under this), or just after a massive war they came out on the losing side of. In my view it is clear that hyperinflation is actually more of a symptom of an underlying problem (which we should be wary of and avoid) than a specific problem we should be wary of in itself. Orange Devil fucked around with this message at 22:40 on Jan 28, 2019 |
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Jan 28, 2019 22:32
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