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As long as the government has the power to tax, it can shrink the supply of currency as much as it wants. There is no such "easy fix" for supply problems.

• dnautics 9y ago
  But why would it ever shrink the supply of money? Much easier to take from the working class and give to cronies, then blame it on greed and capitalism.
  • RobertoG 9y ago
    Normally, the cronies are rich people. Even if inflation could be advantageous, sometimes, for some people, hyperinflation don't benefit anyone, but it benefit rich people the less. If you have liquid or even financial assets, you don't want inflation. If somebody owns you money you don't want inflation. If you want to hire cheap you don't want government spending in the economy and making workers more expensive. So, you have an interest in scare people about become the next Zimbabwe and all that. We can be sure that the cronies are already in charge when a little inflation is sold as worse than unemployment for instance.
  • mywittyname 9y ago
    Discriminatory tax policies are very effective at enriching the wealthy. If you think about it, being rich or wealthy is really just having a disproportionate share of the economic output of a region. You increase this share by taking in more money from other people than you spend. Most of the time, this happens through returns on investments, but getting the government to tax someone else more than they do yourself achieves the same result (more relative assets). This is part of the reason lobbying has such a great ROI for companies.
  • wz1000 9y ago
    So that its currency has value? The government does not benefit from hyper inflation.
    • dnautics 9y ago
      The whole point of hyperinflation is to devalue sovereign debt. The ONLY entity that benefits from hyperinflation is the government.
      • wz1000 9y ago
        The government doesn't benefit from hyperinflation, it benefits from wiping out its debt. Taxing away the excess money after it has finished doing that prevents hyperinflation while still reducing debts. The government has the most to lose from hyperinflation, because without currency anyone will accepts, the government is severely reduced in power. With a healthy currency, the government has nearly unlimited ability to finance itself.
      • jganetsk 9y ago
        Causality is backward here, really. Government debt and money are effectively the same thing. Growing government debt is growth in the money supply, which can lead to inflation. Governments don't try to devalue sovereign debt, they try to pay off their foreign debts. For that, they buy up all foreign currency in the market, sending the value of their currency plummeting.
  • jganetsk 9y ago
    The supply of money = government debt + private bank credit. So if the government runs a budget surplus or private bank credit shrinks (more old debts are paid off than new debts are issued) then the supply of money shrinks. This happens in actual economies.