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Public spending is never the underlying reason for hyper inflation. Usually there are other circumstances like supply problems. Money chasing too few resources.
by mempko 10y ago
Public spending is never the underlying reason for hyper inflation. Usually there are other circumstances like supply problems. Money chasing too few resources. If resources and production kept up with money supply increase, then there would be no problem. Deficit spending is necessary if you want private sector to have savings.
For example, look at Japan. Central Bank tried for over 25 years to increase inflation without success. It's actually not very easy to do.
- SubiculumCode 10y agoI agree. Most historical cases of hyperinflation had major structural/sytemic issues limiting production capacity relative to demand. Currency creation is only a problem relative to the capacity to produce.
- leovonl 10y agoIf the government spends in excess and prints money to cover the costs, that means an increase in money supply. Which leads to inflation. Indeed, the spending alone would not be a problem if it was properly managed.