The Deflation Years

[neilm]

May 11, 2022 20:33:01 GMT @boogieeck said:

I am sure that just as government can create fiat money, it can also declare it to no longer exist, but I am fuzzy on how. Advice is sought. It must be more than simply not creating new government bonds

www.reuters.com/world/uk/giving-up-gilts-how-bank-england-plans-reverse-qe-2022-02-01/

[neilm]

Asset valuation of land: new rules to restrict buildings valued at x being used to support mortgages or loans valued at x+n.

Price controls, like the ones on Réunion.

Encourage savings through various tax breaks and reforms including forcing banks to pay higher interest on savings and current accounts.

Devaluation (this would probably have the reverse effect but its tempting for various reasons)

Order oil companies and petrol stations to cut fuel prices as soon as the price goes down in the same way they increase them without hesitation.

Close down large parts of the NHS.

All of this smacks a little bit of government heavy handedness (or, as I like to call it, 'the very existence of the state') but there isn't really another way to force change.

[slon]

Privatise public transport

[gwynthegriff]

May 12, 2022 16:13:41 GMT slon said:

Privatise public transport

You mean I get my own bus?

[myth11]

Move back to direct taxes on income instead of consumption.

[Deleted]

Well, on certainty is that EL has fled the country for either Leiden or Toulouse

[stb12]

Who is Foreign Secretary?

[J.G.Harston]

Hong Kong tried legislating a ceiling on mortgages of 2.5*income# to damp down property prices. People just maxed out their credit cards instead.

#fuzzy recollection of exact number.

[J.G.Harston]

Hmmm.... Increasing the money supply feeds inflation. You can only increase the money supply with a fiat currency. So.... adopt a metallic currency standard. How about plutonium. Safe from being stolen. Run out of plutonium? Can't print any more banknotes.

[finsobruce]

May 12, 2022 21:54:26 GMT J.G.Harston said:

Hmmm.... Increasing the money supply feeds inflation. You can only increase the money supply with a fiat currency. So.... adopt a metallic currency standard. How about plutonium. Safe from being stolen. Run out of plutonium? Can't print any more banknotes.

Well it's an idea.

[neilm]

May 13, 2022 8:24:22 GMT @boogieeck said:

May 12, 2022 10:20:54 GMT neilm said:

Price controls, like the ones on Réunion.

do tell, I am instinctively suspicious

There are price issues in the French TOMs (or whatever whatever they're called at the moment), to the extent that even locally produced stuff is a fair bit more expensive than in the Hexagon. A friend of my dad's (who lives in France) went to Martinique on holiday and commented on this: I pointed out that he was at a resort aimed at well heeled older people so you couldn't blame the locals for knowing their market, to which he responded by saying that it was the prices in actual supermarkets that surprised him right down to things that you'd think would be abundant like bananas.

I'm not endorsing it as a strategy, but: www.lemonde.fr/en/2022-presidential-election/article/2022/04/19/on-reunion-island-a-price-shield-to-fight-the-high-cost-of-living-inspires-french-presidential-candidates_5980924_16.html

[neilm]

I think in this case the problem is real: because lots of stuff has to be imported, prices are higher than Metropolitan France. But public sector salaries (which are the bulk of the economy in these places), which are paid by the mainland taxpayer, are at the same level.

I'll rephrase, it's a real problem but only because they've not worked out how to not be reliant on the French taxpayer.

[aargauer]

May 11, 2022 20:33:01 GMT @boogieeck said:

I am sure that just as government can create fiat money, it can also declare it to no longer exist, but I am fuzzy on how. Advice is sought. It must be more than simply not creating new government bonds

But new ideas to make inflation run in negative territory are sought even if you don't advise them. maybe others can iron out the glitches, so don't be shy.

I don't think you want to run prolonged deflation. If you want the return of real money, just link back to the gold standard. The problem is, we don't have enough gold...

In the meantime, get the central bank to sell government bonds and raise interest rates - but you would basically just create a crushing recession.

[slon]

Hang on .... what do you think you mean by deflation here?

Deflation is a reduction in consumer and asset prices, doesn't matter what the money supply is doing, doesn't matter if money is paper, crypto, or gold.
Money supply has more impact on GDP than prices.

The idea that you can have deflation in 25% of the economy is confusing. Does it mean only certain sort of things will see a reduction in price, or that price reductions will only happen in certain places?

[aargauer]

May 14, 2022 15:14:55 GMT slon said:

Hang on .... what do you think you mean by deflation here?

Deflation is a reduction in consumer and asset prices, doesn't matter what the money supply is doing, doesn't matter if money is paper, crypto, or gold.
Money supply has more impact on GDP than prices.

The idea that you can have deflation in 25% of the economy is confusing. Does it mean only certain sort of things will see a reduction in price, or that price reductions will only happen in certain places?

Money supply isn't the only cause of inflation / deflation but its a certainly a big factor.

[J.G.Harston]

May 14, 2022 15:14:55 GMT slon said:

Hang on .... what do you think you mean by deflation here?

Deflation is a reduction in consumer and asset prices, doesn't matter what the money supply is doing, doesn't matter if money is paper, crypto, or gold.
Money supply has more impact on GDP than prices.

But a reduction in money supply produces deflation because there is less money chasing more goods - the opposite of an inflationary scenario where you have more money chasing fewer goods.

Yes, it's doesn't matter what that money is, it's the quantity of it that matters, not its form.

One of the features of a metallic* money standard is that you *can't* create more money that the commodity it is based on. If you can't create money at the speed of the economy then the money supply declines relative to the economy - which is another way of saying that the money supply reduces. This is held up in economics theory as "a bad thing" because it creates deflation - but Boogs is actually trying to create deflation.

*or any other non-fiat currency.

[myth11]

The government tried between 1740 and 1800 to get everyone to eat whole grain bread instead as the price of white bread was soaring due to a growing population and you could produce a lot more whole grain bread for the same amount of grain however it was not popular with one act of parliament been nicknamed the poison act.

[neilm]

May 14, 2022 19:09:50 GMT myth11 said:

The government tried between 1740 and 1800 to get everyone to eat whole grain bread instead as the price of white bread was soaring due to a growing population and you could produce a lot more whole grain bread for the same amount of grain however it was not popular with one act of parliament been nicknamed the poison act.

For those that haven't heard of it, there is information here: georgianera.wordpress.com/tag/brown-bread-act/ and here: intriguing-history.com/stale-bread-act-1801/

[slon]

May 14, 2022 18:19:05 GMT J.G.Harston said:

May 14, 2022 15:14:55 GMT slon said:

Hang on .... what do you think you mean by deflation here?

Deflation is a reduction in consumer and asset prices, doesn't matter what the money supply is doing, doesn't matter if money is paper, crypto, or gold.
Money supply has more impact on GDP than prices.

But a reduction in money supply produces deflation because there is less money chasing more goods - the opposite of an inflationary scenario where you have more money chasing fewer goods.

Yes, it's doesn't matter what that money is, it's the quantity of it that matters, not its form.

One of the features of a metallic* money standard is that you *can't* create more money that the commodity it is based on. If you can't create money at the speed of the economy then the money supply declines relative to the economy - which is another way of saying that the money supply reduces. This is held up in economics theory as "a bad thing" because it creates deflation - but Boogs is actually trying to create deflation.

*or any other non-fiat currency.

Yes, but 

Monetarism is not the answer to all problems.
When inflation is not caused by demand side pressures but instead by supply side problems then restrictions on money supply will have the opposite effect to that desired.

[J.G.Harston]

May 15, 2022 8:14:45 GMT slon said:

May 14, 2022 18:19:05 GMT J.G.Harston said:

But a reduction in money supply produces deflation because there is less money chasing more goods - the opposite of an inflationary scenario where you have more money chasing fewer goods.

Yes, it's doesn't matter what that money is, it's the quantity of it that matters, not its form.

One of the features of a metallic* money standard is that you *can't* create more money that the commodity it is based on. If you can't create money at the speed of the economy then the money supply declines relative to the economy - which is another way of saying that the money supply reduces. This is held up in economics theory as "a bad thing" because it creates deflation - but Boogs is actually trying to create deflation.

*or any other non-fiat currency.

Yes, but 

Monetarism is not the answer to all problems.

Yes, there are other levers to influence the economy. I was pointing out one of them. I was hoping other people would point out others, as monetarism is the bit I know about.