Re:UK: Food inflation rises to 18.2% as it hits highest rate...
by somenameforme on Saturday March 25, 2023 @10:45AM
(#35303129)
Again this is not really a solution to the problem. Because the issue is not one of monetary supply, but of velocity. Giving money to people who will spend that money increases monetary velocity. The only way to prevent this is to reduce the amount of money people are spending.
That's why, for instance, the Fed is currently raising interest rates. They want to 'gently' brake the economy (while trying to avoid breaking it) such that people stop spending so much money, and inflation cools down. By contrast countless countries have tried to solve inflation by simply naively tackling the problem.
People don't have enough money to buy chicken? Well obviously we just need to give them more money! And that's how you get Zimbabwe. [1] Alternatively, another direct approach is to say "Okay - companies may no longer charge more than $0.50 for a chicken." That's how you get Venezuela. [2]
That's why, for instance, the Fed is currently raising interest rates. They want to 'gently' brake the economy (while trying to avoid breaking it) such that people stop spending so much money, and inflation cools down. By contrast countless countries have tried to solve inflation by simply naively tackling the problem.
People don't have enough money to buy chicken? Well obviously we just need to give them more money! And that's how you get Zimbabwe. [1] Alternatively, another direct approach is to say "Okay - companies may no longer charge more than $0.50 for a chicken." That's how you get Venezuela. [2]
[1] - https://www.theguardian.com/money/2016/may/14/zimbabwe-trill...
[2] - https://www.reuters.com/news/picture/venezuelas-empty-shelve...