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There may well be serious real problems, which the central bank can't magically solve. But if you're just worried that there might not be "enough" inflation, t

There may well be serious real problems, which the central bank can't magically solve. But if you're just worried that there might not be "enough" inflation, the central bank has unlimited ability to create that, if it wishes to. (Of course, whether such inflation would be a good idea is debatable, and could depend on the circumstances.)

nabla9 7y ago
> the central bank has unlimited ability to create that, if it wishes to. This is not true as the recent decade shows. Japan has tried to increase inflation almost two decades. Just increasing the money stock does not create inflation if the velocity of money decreases at the same rate.
- disease 7y ago
  If I remember correctly from my econ classes, deflation has a nasty spiraling effect where any currency introduced into the system is subsequently hoarded, which decreases economic activity which makes money even more valuable which increases hoarding ... There are many tools in the toolbox for handling inflation. For deflation, not so much.
- radford-neal 7y ago
  No, Japan has not really tried to create inflation. If they had, they would have succeeded. If the government prints lots of cash, and then mails a bunch of cash to every person in the country, then there will be inflation. Lots of inflation, if the amount of cash is high enough. And there's no limit to how high the amount can be. To doubt that, you have to believe that someone of previously modest means who now has a million dollars of cash in hand will just horde it, rather than go out and buy the $40,000 car they've been wishing they had, or the nice $500,000 house they now could live in, or the nifty $10,000 camera and lens set that would be really fun to play with, or the... Actually, you don't have to just believe that someone will horde immense amounts of cash rather than buy real, useful stuff with it, you have to believe that almost everyone will horde the cash. People aren't like that.
AnimalMuppet 7y ago
The central bank can create unlimited inflation in financial assets. In, say, food, or cars, not so much. (I mean, I guess they could buy a bunch of food and cars, but that's pretty far out there, even for the current expansive definitions of what the central banks can do.)
- anjc 7y ago
  Isn't this what some governments (through purchasing supply) and some central banks (through relaxed lending restrictions) have done with real estate?
  - AnimalMuppet 7y ago
    Yes, but real estate is at least half in the "financial assets" category.

nabla9 7y ago

> the central bank has unlimited ability to create that, if it wishes to. This is not true as the recent decade shows. Japan has tried to increase inflation almost two decades. Just increasing the money stock does not create inflation if the velocity of money decreases at the same rate.

disease 7y ago
If I remember correctly from my econ classes, deflation has a nasty spiraling effect where any currency introduced into the system is subsequently hoarded, which decreases economic activity which makes money even more valuable which increases hoarding ... There are many tools in the toolbox for handling inflation. For deflation, not so much.
radford-neal 7y ago
No, Japan has not really tried to create inflation. If they had, they would have succeeded. If the government prints lots of cash, and then mails a bunch of cash to every person in the country, then there will be inflation. Lots of inflation, if the amount of cash is high enough. And there's no limit to how high the amount can be. To doubt that, you have to believe that someone of previously modest means who now has a million dollars of cash in hand will just horde it, rather than go out and buy the $40,000 car they've been wishing they had, or the nice $500,000 house they now could live in, or the nifty $10,000 camera and lens set that would be really fun to play with, or the... Actually, you don't have to just believe that someone will horde immense amounts of cash rather than buy real, useful stuff with it, you have to believe that almost everyone will horde the cash. People aren't like that.

AnimalMuppet 7y ago

The central bank can create unlimited inflation in financial assets. In, say, food, or cars, not so much. (I mean, I guess they could buy a bunch of food and cars, but that's pretty far out there, even for the current expansive definitions of what the central banks can do.)

anjc 7y ago
Isn't this what some governments (through purchasing supply) and some central banks (through relaxed lending restrictions) have done with real estate?
- AnimalMuppet 7y ago
  Yes, but real estate is at least half in the "financial assets" category.