Re:Estonia clocks fastest inflation in the Eurozone at 20.1 ...
by codedokode on Wednesday June 08, 2022 @11:43AM
(#31669059)
> No matter what anyone did, the currency would lose value week after week, month after month.
Cannot one convert their money to dollars or gold and start getting profit from inflation?
UPD: I forgot that in such cases governments usually impose large tax on currency conversion. Obviously you can't outsmart the government.
Re:Estonia clocks fastest inflation in the Eurozone at 20.1 ...
by smnrchrds on Wednesday June 08, 2022 @01:58PM
(#31671467)
If everyone sells their currency to but dollars, the currency loses even more value faster compared to dollars, so currency controls are put in place, like Argentina did for a while:
https://en.wikipedia.org/wiki/Argentine_currency_controls_(2...
Re:Estonia clocks fastest inflation in the Eurozone at 20.1 ...
by GFischer on Thursday June 09, 2022 @05:18PM
(#31687027)
What do you mean "for a while", Argentina has currency controls TODAY.
https://www.bloomberg.com/news/articles/2021-11-25/argentina...
Re:Estonia clocks fastest inflation in the Eurozone at 20.1 ...
by smnrchrds on Friday June 10, 2022 @10:38AM
(#31694841)
It used to have currency controls. It still does, but it used to too.
Re:Estonia clocks fastest inflation in the Eurozone at 20.1 ...
by whimsicalism on Wednesday June 08, 2022 @09:55AM
(#31667396)
Spending less and saving is exactly the opposite of what is typical in a high inflation society.
Re:Estonia clocks fastest inflation in the Eurozone at 20.1 ...
by cs702 on Wednesday June 08, 2022 @11:01AM
(#31668347)
As I wrote, that's what everyone tries to do (e.g., businesses lay off employees, try to raise prices, and hoard inventory), but in the aggregate it's impossible for everyone simultaneously to cut spending, increase earnings, and hoard more stuff as the currency loses value. The sum of all individual decisions, which may seem rational to each person or business, add up to aggregate behavior that in hindsight proves counter-productive to economic stability.
As Keynes put it, "the process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." Speaking from personal experience, I think he was spot-on.
Re:Estonia clocks fastest inflation in the Eurozone at 20.1 ...
by whimsicalism on Wednesday June 08, 2022 @12:19PM
(#31669644)
Nope, most individual consumers and businesses spend more when inflation is unexpectedly high.
Re:Estonia clocks fastest inflation in the Eurozone at 20.1 ...
by cs702 on Wednesday June 08, 2022 @12:38PM
(#31669954)
They try to reign in spending, but end up spending more (in nominal, but not necessarily real, terms).
Please don't misinterpret what I wrote!
Re:Estonia clocks fastest inflation in the Eurozone at 20.1 ...
by whimsicalism on Wednesday June 08, 2022 @04:38PM
(#31673699)
I'm not misinterpreting what you wrote. they will not try to reign in spending because holding more money becomes less valuable
It affected behavior in ways that in hindsight were very counter-productive to economic stability: Every adult person and every business simultaneously tried to spend less, earn more, and hoard more -- which is impossible in the aggregate, because every expense by one person or business is income for another person or business. No matter what anyone did, the currency would lose value week after week, month after month. And everyone felt... powerless, unable to do anything about it.
John Maynard Keynes wrote what I think is the most insightful description of what living with high inflation is like: "There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."[a]
[a] The Economic Consequences of the Peace (1919), by John Maynard Keynes.